Get Out of Debt Without Filing Bankruptcy

December is the time of year when our retail establishments make their money. A big portion of that is all due to the use of credit cards. Unfortunately for many, the ease of the use of the “plastic devil” pushes them down the slippery slope of debilitating debt.

Eventually, they wind up at the point in January and February, where they are overwhelmed with a financial hangover and avalanche of debt they have created not only in December, but probably over the last two or three years. Unless they take action immediately, they will continue down the inevitable trail that will lead them to bankruptcy.

However, if your only debt is credit card debt and you have a regular steady income, this article addresses FIVE STEPS you may implement to get out of debt in 36 months, improve your credit, and avoid bankruptcy. However, the key element and skill that you must have boils down to one word: DISCIPLINE.

Step 1: Budget Required Living Expenses. Start by taking out a blank piece of paper and your monthly bank statements for at least three months. List every category of expense that you have for your bills for living expenses; items such as your mortgage or rent, auto payments, insurance payment, telephone, television, health insurance, etc.

Also, include your expenses for food and gas, and budget in amounts for repairs, utilities, dry cleaning and prescriptions. This is just a partial list and this list will be different for each person. Once you have added that up, you next need to total up your monthly net (or take home) income. Hopefully at this point, your net monthly income exceeds your expenses. If not, you are already in trouble.

Step 2: Add your Credit Card Payments. The problem for most individuals is they have never budgeted before, and when it comes to credit cards, they pay just the minimum. Fortunately, credit card companies are now required to disclose on consumer credit cards the length of time it will take and how much you will pay if you just make the minimum payment, versus how much you must pay to pay off your credit card in 36 months.

However, even this amount is deceptive in that if you pay the amount indicated for a three year payment, each month it changes as your balance goes down. So it is important that you write down what the minimum payment is as of today, and budget to make that same payment for the next 36 months and not the payment that is disclosed on your bill in future months, since that payment amount will go down each month. So take that three year payment amount from each of your credit cards and add that to your budget expense.

Step 3: Add Discretionary Funds to the Budget.
After you have added your required expenses to live and the payments required to pay off your credit cards in three years, you can next add your discretionary expenses for say recreation, dining out, vacation and savings. Of course, savings of at least 5% of your gross income should come before all of the discretionary expenses.

Step 4: Track every Penny. This is the biggest key for your success. This is where a spreadsheet comes in handy. List all of your monthly expenses on a spreadsheet. Then make a column for each month to track the expenses to make sure you are staying within what you have budgeted. This is key to avoid going into further debt.

Mark down all of your expenses for each month to see whether or not you are exceeding your budget. If you are, then you will need to make adjustments. All of the budgeting and planning is useless unless you track every expenditure.

Step 5: Stop using your credit cards. Unfortunately, Madison Avenue bombards us with the idea that instant gratification is perfectly fine. The credit card companies jump on board with that same message, so that you can wind up paying 15%, 22%, 27% interest for that 72 inch TV or cruise that seemed like a really good deal at the time you bought it. [Been there. Done that!]

If you wish to avoid bankruptcy and have more than 10% in debt compared to your gross income, then you need to follow this payment system AND stop using your credit cards. If you do use your credit cards, it can only be for a budgeted expense, say for gas, and then you must add the gas charges to the payment that you previously budgeted in order to pay off the card in 36 months. This way the account balance will decrease each month.

As I stated in the beginning of this article, the key to this system is discipline. It is very difficult to stay on a budget, especially if you not done so in the past. However, if you fail to impose the discipline on yourself now, ultimately a Bankruptcy Court may impose a 36 – 60 month Chapter 13 repayment Plan.

Accordingly, if you have the desire and self-discipline to avoid bankruptcy, and your debt is mainly credit card debt, the foregoing Five Step System is the solution to fix your debt problems. If you have any questions or would like further assistance or information regarding getting out of debt, please call us at: 941-206-3700 or e-mail me at:

Contact a Bankruptcy Attorney

If you have a situation as we described in this article and have questions or concerns, please don’t hesitate to contact us to answer your bankruptcy legal questions.
Martella Law Firm
18501 Murdock Circle, Suite 304
Port Charlotte, FL 33948