People who are struggling with debt management often look to bankruptcy as an escape from their problems. They believe bankruptcy will offer them a clean slate. As nice as that may seem, it is not always an easy solution. When you file for bankruptcy, it destroys your credit rating and you may also be forced into selling some of your assets. Employers may also be hesitant to hire you with a bankruptcy information in your past credit history. There were some changes in the bankruptcy laws in 2005 that made it more difficult to file for Chapter 7 bankruptcy.

If you find yourself in a situation where you are considering bankruptcy as an option, you may want to preserve your credit rating with other means. It will not be an easy task but the long term results will be worth the effort.

The first thing you should look after is debt settlement. You will have to organize your debts and total everything. Find all of your bills and document the totals that you owe to each lender. You should also compile your total assets including your home and other properties if you have them.

Next, you should list all of your debts into two separate categories which are good debts and bad debts. Good debts are home loans and student loans. Bad debts are everything else such as credit cards, personal loans, high rate car loans and medical bills that you may have. As you are listing each debt, you should also note the interest rates and minimum payments for each debt.

After you have compiled all of your debts and assets, you should begin to document all other expenses you have on a monthly basis so you can begin to cut expenses as much as possible. Even if you spend three dollars a week at the office vending machine, you should include that in your expenses.

Once you have all of your expenses listed, you should also divide that into two categories which are necessities and non-necessities. Necessities would be anything that you need in order to survive. Items included in the necessities category would be groceries, housing, electricity and water. In your non-necessity category, you should include everything else such as snacks from the vending machine.

Now that you have everything listed, you should determine what your minimum payments are on your debt on a monthly basis and add the monthly necessities cost. This total is the minimum amount of money that you need in order to pay your bills and have your necessities each month.

If you find that your current salary does not cover this amount, then you need to find a way to reduce your expenses as much as possible. You may need to switch brands at the grocery store, clip coupons to save more money, or cancel your cable programming to cover the monthly costs.

If you are able to cover the costs of your monthly payments and still have some money leftover, you should pay more than the minimum on your debt payments. You should also try to pay down the smallest debts first. If you follow these tedious tasks, you can avoid bankruptcy and save yourself the ongoing problems from damaging your credit.