1. Detail out all your debts

First, look at all your secured debts such as mortgage and car loan. How much are the repayment for each month? What are the interest rates?

Then, list down all the fixed expenses such as power, phone, insurance, food, etc. What are the total costs for these expenses?

Follow by examining your credit card debts. Take out all your credit card statement and write down the amount you owe for each card and their interest rate.

Finally, write down all your other expandable; these are your optional expenses such as entertainment, gym, membership, dinners at restaurant and other impulsive purchase.

2. Eliminate the unnecessary expenses

Now you should have a better idea on where your money goes; Make a diet plan on your cash; In your Cash Diet Plan, list down all the your savings from the elimination of the optional expenses. You will be surprise that how much money you can save by carefully control your expenses. The money you saved can be used to pay down your debts.

3. Get your family involve and work as a team

Don't do it alone because under such as stress condition, you may out of control and may not think and plan in clear mind; get your family together and let them know your financial problem and have them to work together to control the household spending and eliminate the unnecessary expenses.

4. Cash out with your assets

If you have equity, you are in a better situation because you could refinance or get a secured loan for pay off your debts. If you are looking for bankruptcy as your debt relief options, your may not have any equity in hand already. But equity is not the only asset; many people tend to forget that things that have cash value, but not sentimental value. Think antiques, old clothes or collectibles.

List down all the assets you own which your can sell and cash out. Check the closets, garage and storage locker, she says, "and find out what you can live without". Then, cash them out through garage sales, eBay or consignment shops. Use the money to pay down your debts as much as possible.

5. Go for consumer counseling service

Arrange an appointment with a credit counseling agency and let the counselor to understand your finance situation and draft a budget for you. Review the debt management plan proposed to you before your sign to enroll into the plan. You may get a few plans from other credit counseling agencies for comparison. Choose the one which best suit your current financial needs. Although a debt-management plan can have a negative impact on your credit, it's better than bankruptcy.

6. Get A second or part time job

Utilize your out-of-work time on second or part time job. Although you may not earn much in your part time job, a little money coming in can keep a bad financial situation from getting worse.

Summary

Bankruptcy may be your easy way out from debts but the consequences may follow you for 7 to 10 years. Always look for other alternative before choose for this dramatic options.

Legitimate debt counseling companies do not claim to be not-for-profit if they are not. There have been cases where a company has claimed this and ended up swindling their client’s money. There are ways to protect yourself; you should check a debt counseling company’s reputation thoroughly before investing your time and effort into them.

Never conduct business with a company that requires any upfront fees or asks you for voluntary contributions. This is a red flag, legitimate debt counseling companies advise you on money management, budget development, debt and educational material and occasionally workshops.

Essentially, it is none of their business regarding the details of your situation or requires you to be approved. They should discuss your financial situation and help you in developing a plan to eliminate the problems.

You can also check your local government agency or better business bureau, to ensure that they are indeed legitimate and no complaints have been filed against them.

The other things that will tell you rather or not a debt counseling service is legitimate include the following things. If they promise lowered payments, leave, only interest rates can be lowered not payments. If they ask you for your account numbers prior to giving you a quote, this is not necessary at all. If they group the quotes together instead of giving you a breakdown of how each creditor will be handled, this will leave you with no idea of how long it will take to pay off each account.

There are also questions you should always ask when choosing a debt counseling service. These questions should include charges for educational material, a disclosure in writing of fees that are charged, if they are properly licensed to do business in your area, what will happen if you cannot afford their fees, what type of services do they offer and if the counselors are certified and who certified them. This is your money and your financial well-being, do not leave any stone unturned.

There is a new bankruptcy law that makes filing bankruptcy harder for everyone. To file a chapter 7 will be nearly impossible if you are currently employed. They have formed a test that you will have to pay showing that your income is less than the median income for your area. Along with these new laws, it has become required to obtain debt-counseling services when filing bankruptcy.

Choose the debt counseling company very carefully and ensure they are legitimate. You do not want to cause more harm or damage to your credit, so choose reputable companies wisely.