10 Simple Steps to Get Out of Debt Without Going into Bankruptcy

by David@MoneyNing.com · 15 comments


So you’re up to your neck in a massive pile of debt. There are many circumstances that could have led you here, but responsible financial planning is the one that will get you out. Most debt situations can be corrected with careful planning and intense effort over a period of one to three years.

You’ll need to include everyone in your household and be honest about the need for focused debt reduction efforts. You can do it if you follow these steps to achieve pay off all outstanding debt without filing for bankruptcy protection:

debt and bankruptcy1. Save $500.

Figure out how to save $500 in an emergency fund that will be accessed in the event of an unexpected expense during the debt pay off project. Eliminate every discretionary expense possible and accumulate enough funds to meet the $500 goal.

2. Organize debts.

Make a chart of every outstanding debt in order from smallest to largest without any concern for interest rates. Immediate feedback will be realized when smaller debts are paid off early in the process.

3. Stop all credit card use.

Cut up the credit cards and spend cash even at the grocery store. Take absolute control of the monthly expenditures by starting a budget. Write checks to pay bills and allocate cash for all other budget categories.

4. Trim the budget.

Make some difficult decisions and eliminate any expense that is not directly related to supporting the family. Consider disconnecting the cable television service until the debts are repaid. Reduce the land line phone bill by removing unnecessary features. Determine if more than one cell phone is necessary.

5. Do not go shopping.

Avoid shopping for anything except for groceries. When shopping for groceries, buy items on sale and learn to cook from what is present in the kitchen. Reduce or eliminate eating at restaurants until all the debt is repaid.

6. Pay the minimum on all but the smallest.

Every debt must be maintained in good standing to eliminate unnecessary fees. Pay the minimum payment amounts on all debts with the exception of the smallest on the list. Apply as much money as feasible within the budget to the smallest bill. Be realistic when setting this amount to prevent shortfalls in other budget areas.

7. Reward yourself.

When a debt is paid off completely, reward the family. Order pizza or purchase a new game for family game night. Use non-monetary rewards so everyone learns the value of time together over spending money.

8. Apply funds to next debt.

Take the amount that was used to pay off the first debt and add it to the minimum payment that has been paid on the next debt on the list. This method will accelerate the amounts paid on the larger debts. The accumulation effect will cause faster progress in the later months of the process. Every time a debt is paid off all of the money is rolled into paying off the next debt.

9. Delay unnecessary purchases.

Throughout this process, the expense level must be reduced within the household. Spending cannot continue as usual if real progress is to be made on the debt repayment plan.

10. Celebrate success!

When all of the debts have been repaid, immediately start a savings plan that will prevent the situation from repeating itself. Attempt to save half of the amount that has been applied to the debts of the previous months and years. Decide together on a reward for the family’s achievement.

Financial spending habits must change to prevent a recurrence of the indebtedness. Live according to a family budget and ensure that all bills can be paid within the month they are incurred.

Evaluate the period of the debt repayment plan and determine what works for the family. Keep the best activities of the financial discipline learned throughout this period as good financial habits.

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{ read the comments below or add one }

  • jordanroyweb1 says:

    Very well-written post! I read and loved your 10 points regarding getting out the debt. You have mentioned clearly the points and very precisely. One should focus on their purchases so as they can manage their financial condition. Nowadays financial planning is on demand and GCC Business Finance will help you out! Even if you want any kind of loans they will reach you out!

  • DNN says:

    Don’t forget to increase the affiliate marketing promotions and be more frugal. Spend less and write reviews about all purchases made so you can earn all your $ gUaP $ back & more! 🙂

  • consolidate debt co says:

    An excellent way to get out of debt, is to go through with a credit counseling company. STaying away from bankruptcy is an absolute must! Good information here though thats for sure.

  • rommel says:

    Thank you captain obvious….beyond stupid…wow what genious…spend less…save money…idiot

  • Loren Baxter says:

    This is a great introductory guide. I want to add some info for step #6:

    Paying down your credit cards in the order of smallest balance to largest balance is one of two options. This approach’s strength is in the psychological motivation is provides: every card you pay off is a great reward, and stacking the payments feels awesome.

    The other approach is to pay off your cards in order of highest interest rate (APR) to lowest interest rate. The strength of this approach is that it saves the most money, and can get you out of debt more quickly.

    Which one you choose is up to you 🙂

    I’m the design lead at a startup focused entirely on helping people with credit card debt, http://www.ReadyForZero.com . I hope it doesn’t sound like an ad, but please do have a look and let me know if you find it helpful. We would love to help solve this problem for folks who are ready to be done with debt.

  • KDB says:

    This is solid, logical advice even if bankruptcy is not a possibility. Unfortunately our credit cards come with all types of legal mumbo-jumbo but no practical advice for managing your money and staying out of financial trouble.

  • Randy Addison says:

    Do not go shopping. If it is inevitable to go shopping, then do not bring your credit cards. this will definitely help you spend less and get through a personal rehab routine for excessive shopping.

  • rj says:

    Switching from a credit card to a debit card can help alot. The main reason people use credit cards is because they are so convenient, then they overspend and get stuck under snowballing interest. There really isn’t any reason for people to use credit so often, when they can just use their own cash.

  • First Gen American says:

    Do not shop. Sounds so simple and it’s great advice. I even try to keep grocery shopping to a minimum. Every time you set foot in the store, it’s another opportunity to part with money.

    I don’t personally agree with debt whisperer. Just simply stopping using credit may take decades to fix if you’re paying high interest rates on your balance. I’m glad that they now force companies to publish the years to pay off your balance because it’s eye opening.

  • Chef Todd Mohr says:

    I’m not a financial expert, but I can attest that when you learn to cook, you have power over your food choices, and can reduce your dining-out and grocery budget considerably.

    I have seen the change made in thousands of people’s lives when they learn to cook. I’m not talking about following recipes and spending a lot of money on cookbooks. I mean there is great freedom in understanding the basic methods that go into cooking. When you learn HOW to saute’, you can then use chicken, shrimp, tofu, beef, vegetables, it’s all the same.

    Being able to cook by method means you never have the stress of trying to figure out “what’s for dinner” every night. You can cook with the ingredients on-hand. You’ll never have the frustration of written recipes not working, you’ll save money on take-out food, improve your nutrition, gain a new hobby, reunite your family, entertain for friends, gain confidence, eat a greater variety of foods, and have a skill for a lifetime.

    Learn HOW to cook and you won’t be buying ingredients that the recipe commands, you’ll cook from what you want and open a whole new lifestyle for yourself while helping your budget.

    Chef Todd Mohr

  • Kenny Tey says:

    I couldn’t agree with you more…

    Most of the us are not trained on how to manage our finances during school, and some have to learn through the hard way.

    We need to start to educate the youngsters before it’s too late.

  • Jane says:


    I certainly agree with your steps especially the one on Celebrating. When a person is mired in debt & feeling very weak, it is essential that they also celebrate the small success to build up their inner strength. Had I known that, my earlier debt journey would have been easier. Its a very fulfilling journey to be out of debt and help others get out of debt.

  • tmgbooks says:

    One of my coaching clients started calling me the debt whisperer. He called me that because he had read all the books but my philosophy in regards to debt was so different from anything he had read. When I wrote a book on my debt reduction concepts and strategies, I liked the name so much I used it for the title of the book.

    The concepts you share in this post are all sound in that they will reduce the debt but debt is only a symptom of the real issue; that issue is spending more than you earn over a period of time and usually the longer you do that the more debt you will have.

    But there are other symptoms as well that have worse ramifications for your long-term financial viability and the worst symptom is a lack of savings.

    Debt is a sunk cost and you should seldom make decisions going forward based on sunk costs. But that is exactly what you are doing when you have both a lack of savings and credit card debt.

    Ask yourself this question: If I were starting over financially today, what would I do?

    And the correct answer is: spend less than I earn and save the difference to build my savings. Building your savings is more important than paying off your debt. Your debt will go away if you simply stop using credit (as you suggest in your post) and keep paying the minimum.

    Do not give debt repayment in larger role in your life than it deserves and it should not be the center of your financial universe. Look, I have read all the horror stories about how much interest you will pay if you only make the minimum payment. But a lot of that scary went away went the minimum payment was raised from 2% to 4% of the outstanding balance. Do the math using a 4% minimum payment and the scenario is not nearly as frightening.

    But really the key is to stop using credit as you write; that is the sine qua non of any strategy to eliminate consumer debt.

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