Bankruptcy is a legal designation ordered by a court of law whereby a person or a company who is not able to pay back debts owed to creditors has their financial obligations wiped clean after the liquidation of any assets they may own.

While this seems like a simple way to deal with financial problems, going through a bankruptcy should always be a last resort, as the complications of the process far outweigh any short term relief from outstanding debts.

It is true that sometimes, the situation may have gotten out of hand and reached a final tipping point; the only way forward then could be to consult a trusted bankruptcy attorney Pennsylvania (or wherever you live), so that you can receive appropriate guidance as to whether filing for bankruptcy should be considered. More often than not, attorneys too can help you figure out different ways in which you may be able to manage your finances and get to repaying your debt, but if there seems to be no other way, then they will guide you through the whole process of bankruptcy. However, in this article, we shall look at ways in which you could avoid that route altogether.

Years of financial problems associated with a bankruptcy could be avoided by taking some proactive steps to pay down your debts and keep your credit rating intact.

First, start by making a budget. You need to determine where your money is going, so you are able to utilize what income you have to your advantage. This is where you figure out just how much you can spend versus what you need to provide to your creditors to cover your debts. Once you have a better idea of how much money you have to work with, you need to put the brakes on any unnecessary expenditures which could be eliminated from your budget. This is also the time to stop using your credit cards and eliminate adding any additional debt on to what credit you may have left.

Once you have a better picture of your current financial obligations, contact your creditors and attempt to work out a different payment plan which can help you avoid getting further into debt. Oftentimes, credit card companies, student loan providers and mortgage companies are willing to work with you in times of a financial crisis if you are having difficulty in meeting your obligations. The key here is to do this as soon as possible before you get too far behind and your debts are turned over to a collection agency. Communicating with your creditors when you have a problem can oftentimes result in a loan forbearance which can assist you in getting back on your feet financially.

Sometimes in cases where your monthly income is not enough to support current living expenses and debt obligations, you may want to consider a consultation with a debt reduction agency, who can assist you in negotiating with your creditors and combining all of your monthly debts into one payment. While this may give you additional breathing room, there is a price in the form of more accumulated interest and service fees associated with using a credit counseling service.

Whatever path you decide to take in order to tackle personal debt, avoiding the trap of bankruptcy is your best bet to keeping your hard earned credit rating and giving you financial freedom.