Almost no situation can put the untenable and crushing amount of stress on your life as being in severe debt does. When you find yourself in such a situation, it can be difficult to see the way out. No solution works for every person, but here is a basic road map to finding your way out of a debt crisis.
First, acknowledge and define the issue. You can’t get yourself out of debt if you refuse to see there is a problem with your personal finances. To being digging out, you also have to know how deep you are, so start making a list of who you owe and how much you owe.
Next, stop increasing your debt. If you were in a hole and wanted to get out, you wouldn’t keep digging down. Stop using credit to live or pay for other debt.
Finally, prioritize debt. Experts often say to begin with the smallest debt first, because it will be easiest to pay off. To begin reducing debt, cut your expenses wherever possible and put that extra money toward debt. Once you pay off one item, put all the extra money toward the next priority.
Voila! Your debt will eventually be paid off, right? Unfortunately, it doesn’t always work that way for each situation. Circumstances can make it impossible to reduce expenses enough to cover debt, and it might be possible that your income has changed and simply is no longer able to cover your debt. In such situations, bankruptcy might be the better road map to follow. Bankruptcy helps ensure debt is discharged in a legal way that clears your slate and helps you recover from a financial crisis.
Source: Woman’s Day, “Debt Management Guide: 8 Steps to Becoming Debt Free,” Jean Marquit, accessed Jan. 29, 2016