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Ways not to Fear Bankruptcy when Getting Out of Debt

    1. Measuring personal financial exposure
    2. Building realistic expectations about debt consolidation

During the time of economic crisis it became of crucial importance to be able to control your personal financial exposure such as credit card debts, personal loans, mortgages and other. Yet, it is much more difficult to do it than say it. Being able to control personal finances is not natural skill that many people are born with and, thus, it takes weeks, month and even years to learn to organise personal financials, arrange financial planning, know what income-to-debt ratio is and how create and maintain personal balance sheet.


One of the main issues that worry many borrowers in times of financial turmoil is how to get out of debt without going bankrupt. There can be a variety of different strategies involved such as selling some of unnecessary assets for extra cash, saving more on reducing monthly expenses, moving to cheaper area if renting or arranging new consolidated debt. Regardless of which strategy is chosen, organisational and planning skills remain crucial in order to structure the repayment procedure for personal debt reduction.


The main aspect of planning is to cover all aspects of your financial exposure. This means knowing exactly how much income you have on a monthly basis and what monthly expenses are. This is called personal balance sheet which provides you with the full picture of your financial standing. The next step in getting out of debt is to reduce any unnecessary spending and ideally reach the point when income side of the balance sheet is larger than the spending one. In order to constantly decrease debt exposure, it is important not only to repay the minimum payment on any personal loans or credit cards, but also to repay a certain amount of the principal. Even if it is small fraction of the entire amount, it still goes into actual repayment of debt rather than just monthly interest coverage.

Debt Consolidation

Graph 1: Debt Consolidation Can Help You to Arrange Financial Planning of Only ONE Loan


If you feel uncomfortable with the strategy described above, consolidated debt companies may give you some level of comfort by providing you with large amount of consolidated debt, which would be enough to repay all of your outstanding debts and bring you to the point of planning the repayment only of one loan. Saving and minimum payment insurance can offer you some additional comfort by providing you with the security that your minimum payment would be repaid should you experience any unexpected break down of your monthly income or unexpected additional expenses.


Ways to get out of debt without going bankrupt can be challenging, but not impossible. As it has been mentioned before, financial planning is core. The borrowers who know their financial situation are better prepared and, thus, are more confident in controlling their financial exposure. They work towards finding and organising secure ways of getting out of debt without losing everything, take more balanced decisions and generally have more settled peace of mind regarding their future. If you are unable to control variety of debts you have, it is advisable to arrange consolidated debt as one way of taking more control of your finances (Graph 1) as it would allow you to plan the repayment of only one loan.

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