How to Get Debt Free Without Filing Bankruptcy

Filing for bankruptcy is a stressful process that may not leave you debt free. Your creditors have the right to contest being included in a bankruptcy filing. In addition, a bankruptcy can remain on your credit report for up to 10 years. As a derogatory entry, a bankruptcy will severely damage your credit score and impede your ability to do everything from finance a new home to procure a cell phone contract. There are ways to become debt free on your own without filing for bankruptcy, but you must be willing to make sacrifices to pay off the majority of your debt.

Instructions

1

Stop making purchases with your credit cards. Although it may be tempting to purchase an item on credit, remember that when the interest rate is factored in, a small purchase may end up costing much more over time. An important step in eliminating your debt is to accrue as little of it as possible.

2

Check your state's statute of limitations for unsecured debts. The statute of limitations is the length of time that a debt is considered legally enforceable. Put any debts you have that are beyond the statute of limitations in the back of your mind to deal with last.

3

Call your creditors and attempt to negotiate a lower interest rate on your accounts. A lower interest rate can save you thousands over time and makes debts much easier to pay off.

4

Consider requesting a debt settlement for debts that you know you will not be able to pay. If your creditor agrees to accept a settlement, the creditor will settle for less than the amount you actually owe on the account.

5

Write down everything you spend money on for a period of two weeks. At the end of the two-week period, evaluate the items on your list. Choose to temporarily stop spending money on luxuries, such as having your car washed or your nails done. Instead, apply the money you would have spent on your luxuries to paying down your debts.

6

Liquidate your assets to pay off your debts. If your home or car is worth more than you currently owe, consider selling it and buying a cheaper version. Use the extra money to put toward your debts. You will still have a roof over your head and a way to get to work, and once you are debt-free, you will have much more disposable income to put toward a new home or car.

7

Polish up your resume and begin searching for a better-paying job. You can continue to live on your current salary while using the excess disposable income from the new job to work toward you goal of being debt-free.