Combining our credit card usage and the number of credit cards we have, getting into debt is almost natural. However, there are a few ways to get into tremendous debts: over-spending, gambling problems, and unexpected life events. This is one trend you should not follow. If you are in debt, the following are suggestions to getting rid of your debt and staying debt-free.

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People who have foreclosures and excessive debts are often left with no other option than filing for bankruptcy protection. Filing for bankruptcy is not an easy fix for a consumer’s financial woes.  Not only does the filing stay on your credit record for a minimum of seven years, but a recent bankruptcy law has made filing for bankruptcy more difficult than ever. Before you decide to file for bankruptcy, you should be knowledgeable about the bankruptcy filing process and its consequences to your financial health.

Bankruptcy should only be considered as a last resort. Declaring yourself bankrupt is the only legal way to get rid of your financial debts. To file for bankruptcy, get into contact with a bankruptcy trustee or judge who will ask you to explain how you have gotten yourself into so much debt. In addition, the court will ask you to file a list of all your assets and debts. There are two types of assets: exempt assets are those that cannot be use to pay off debts and non-exempt assets such as house, recreational vehicles, and boats. There are also two types of debts: secured debts are debts on purchases in which the creditor has security interest on the purchase and non-secured debts are those such as credit card and medical bills. With this information, the bankruptcy trustee will give you a period of time to pay off your secured debt. During this time, creditors cannot lay their hands on your property or goods.

Under the bankruptcy law, you can either file for Chapter 7 or Chapter 13. With a Chapter 7, you will be able to keep your exempted assets while your unsecured debts are discharged. Meanwhile, your non-exempt assets are used to repay the secured debts. Note that debts from student loans, child support and taxes are not discharged. Chapter 7 is usually filed by individuals with lower income, few assets, and large amount of debts. With a Chapter 13, a payment plan is generated for you to repay your debts within a specific period of time usually three to five years. With this option, you are allowed to keep your assets. Individuals who desired to keep their non-exempt assets and buy more time against foreclosures prefer Chapter 13. New bankruptcy laws passed in 2005 has made filing for Chapter 7 very difficult; therefore most individuals file for Chapter 13. Once the court allows you to file for bankruptcy, it will decide what amount of your income is reasonable to pay off your debts based on living standards set by the IRS.

Filing for bankruptcy can be a reasonable option for those in severe financial distress.  Measures need to be taken to ensure that all other options have been exhausted first, because the effect bankruptcy has on an individual’s long term credit history is extreme.

America’s spending habit allows our nation to be overrun with borrowers and lenders. Consumer debts due to credit cards, mortgages, and student loans are constantly increasing due to building interest and growing expenditure.

As of 2003, according to statistics on consumer credit from the Federal Reserve, American consumers owed a total of $1.9773 trillion. That number averages to about $18,654 per household, not including mortgage debt. Compared to what it was in 1998, we have almost doubled our debt within five years.

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