This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 Ways to Step Back From Bankruptcy

NEW YORK (TheStreet) -- There is good news for consumers and the economy on the personal bankruptcy front.

According to the American Bankruptcy Institute, bankruptcies were down 14% last year, to 1.185 million from 1.379 million in 2011.

That's the lowest in five years, the ABI reports. It's also a trend that should continue.

"The 2012 filings represent the lowest total since the financial crisis in 2008," ABI Executive Director Samuel J. Gerdano says. "With low interest rates, reduced consumer spending and continued deleveraging by households, bankruptcy filings will likely continue their decline in 2013."

Even so, there are still well over 1 million bankruptcies expected this year, so the bottom line for debt-rattled consumers is to avoid joining that group any way they can.

That's where Todd Hills, chief executive of Pawngo.com, an online pawnbroker, can help. Hills pawned his own horse saddle in the late 1980s and wound up working for the pawnbroker, ultimately making a career out of the business. He says there are valid ways to "keep the reality of bankruptcy at bay."

Here are Hills' top five ways to avoid bankruptcy. Not coincidentally, they're also five good ways to get your financial life back on track:

  • Work with your lender: Hills says that, time and time again, consumers don't pick up the phone and talk to a creditor they're struggling to pay money to. If the phone is ringing, he says, that's a golden opportunity to work out a deal -- maybe even for less money owed -- to pay off the debt and eliminate late fees and charges.
  • Get counseling: It's perfectly OK to contact a credit counselor to discuss a plan to pay back your debts. In fact, Hills recommends it. But make sure the credit firm is a reputable one. After that, the process is fairly straightforward. "The agency negotiates with creditors for you to eliminate late fees, lower interest rates and extend terms," he says. "You, in turn, make a monthly lump sum payment to the agency, and they pay your creditors for you. Such a program generally lasts three to five years."
  • Cut back: Maybe you've heard the term "living below your means"? Hills swears by it, and says you should, too. "Living beneath your means is the key to a stable financial life," he says. "When your debt is out of control, your best bet is to take a proactive approach and get rid of items before you lose them. For instance, if you have two cars and are struggling to make the payments, selling the most expensive car before it's repossessed gives you money to pay down debt and helps you avoid having a bad situation turn worse."
  • Find more cash: This one isn't easy, but it may be needed to avoid bankruptcy. Hills advises taking a second job or working overtime to catch up on debt. If you can downsize your financial life and add some income, you'll go a long way toward reducing your long-term debt, he says.
  • Create an emergency fund: Even if you "start small," building an emergency fund is still a great personal financial strategy. Part therapy and part financial firewall, an emergency fund is a big step in, well, sidestepping bankruptcy. "Once the balance starts to rise, you'll find yourself more optimistic about your financial future and more likely to save even more," Hills says.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs