How to Reduce Debt Without Bankruptcy

Reducing your debt will help you avoid bankruptcy, which will ruin your credit for seven years or more. Credit card and other debt can quickly escalate out of control so that you cannot even afford to make the minimum payments. High interest rates and late fees can make reducing debt a difficult goal. However, there are several lifestyle changes you can make to help reduce debt.

Instructions

1

Live frugally, and pinch every penny: Clip and use coupons, stop eating out, and commit to purchasing only items you need and not simply desire.

2

Build up an emergency fund while making minimum payments on your credit cards and installment loans. Aim for at least $1,000 in the bank. Only use this for real emergencies, such as medical emergencies and automobile or household repairs that are unavoidable. Having this emergency fund will prevent you from using credit cards to pay for unexpected expenses.

3

Secure a part-time job along with your regular job. You can house-sit, baby-sit, mow lawns, deliver papers or pizzas or get a job in a retail store. Remember that this is not forever, and the extra effort will help you pay off your debts sooner and will relieve the stress. This will give you more motivation and energy toward becoming debt-free or getting your debt to a manageable sum.

4

Downsize to a less expensive home or apartment, and sell any cars that have large monthly payments. Buy a lower-priced vehicle with cash. You can also carpool with your spouse or a coworker. This may cost you more time by having to drop off and pick up each other, but it will eliminate extra car payments.

5

Pay off your smallest credit card first, according to financial adviser, author and radio show host Dave Ramsey. Make the minimum payments on every debt you owe, but any extra cash should go toward paying extra on your smallest debt. Soon you will totally pay off the smallest debt and can double up on the next largest credit card. Ramsey explains that this will have a snowball effect on decreasing your debt over time.

6

Call your credit card company or any place you have debt. According to Credit Cards.com, you should explain that you want to pay off your debt, but your financial situation has changed and you are unable to make the payments in full at this time. The company may waive late fees, freeze your account or agree to take smaller payments over time until you can make the full payments. Showing that you are willing to pay your debts but that it is financially impossible at this time may result in a financial arrangement that works better for you.