As the continuous economic struggles plague America, the financial strain on consumers has increased dramatically. When individual debts have mounted and creditor calls for late payments and defaults have increased, then the stress on borrowers can often be enormous. Certain actions can be taken to avoid a bankruptcy filing by assessing and changing one’s personal finance. Certain questions must be asked:

* Are the minimum payments on your credit card each month all you can make?
* Have credit cards become the only means to pay for necessities, such as food and medicine, because of a lack of cash?
* Are you getting cash advances from one credit card to pay another?
* Are your credit card balances more than your liquid assets?

If the answer is “yes” to two or more of these questions, the debtor may be nearing severe financial difficulties. Many different events may cause a bankruptcy filing including doctor bills arising from unplanned medical expenses, divorce, and job loss. The financial condition of each debtor must be considered and a plan of alternatives to avoid bankruptcy including a consolidation loan or tapping into a home equity line may need to be implemented. In such situations, considerations must be given to the following:

1. A detailed review of the any new loan’s terms including the affordability of the monthly payments.
2. Ensuring the ability to make new payments even if unemployed or unable to work for a six-month period of time.
3. If a home equity line is used, it should be only up to the amount needed to pay off other debts.
4. The future use of any credit cards including discontinuing credit card use completely.

Before any debtor decides to file for bankruptcy, it is advisable to take certain financial steps for at least a month if possible including:

1. Tracking all expenses, including every expense at convenience stores, gas, tips, coffee, etc.
2. Develop and stick strictly to a budget to maximize available cash.
3. Planing for major expenses including establishing financial goals, which should be written down.

All effort by a debtor should be made to pay all debts under the terms of the agreements in order to avoid additional finance charges and to build credit scores. In addition, the highest interest rate credit cards should be paid off first and then the lower interest rate cards. With sound financial discipline, it is possible that the consumer may be able to avoid bankruptcy and regain control of their lives.

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