Are you burdened with a lot of debt and earnestly want to get rid of it?  Well, you may be able to eliminate your debts without declaring bankruptcy, if you are willing to follow appropriate steps.  But before we discuss these steps, let’s briefly consider the responsibility that Christians have to repay their debts.

Many people, including Christians, choose bankruptcy as the quickest and/or the easiest way out of their debt problems.  However, the Bible does not condone bankruptcy as an option.  Psalm 37:21 says that a wicked person “borrows and does not repay.”  Therefore, as a general rule, Christians should pay whatever they owe.  Nevertheless, there may be extreme circumstances when bankruptcy is the only practical alternative, although the Bible does not mention such an alternative. Examples of extreme circumstances would include long-term unemployment, catastrophic medical expenses, etc.

The vast majority of people who have debts could eliminate them without declaring bankruptcy, by taking the following steps:

1.  Stop using credit except for genuine emergencies.  Studies show that people spend more when they use credit cards rather than cash, and that the more credit cards people have, the more they go into debt.  Therefore, it may be advisable to get rid of all of your credit cards, except perhaps one that may be needed in special situations.  Also, don’t depend on a consolidation loan or a home equity loan to solve your debt problem.  Such loans provide only a temporary solution to dealing with debt problems, because they may cause you to become complacent, rather than to try to find a permanent solution.

2.  Prepare a modest financial budget.  Your budget should reflect your desire to get out of debt and, therefore, it should demonstrate your willingness to substantially reduce your discretionary spending for such things as eating out, gifts for others, vacations, etc.  Reducing discretionary spending will give you more money to pay your nondiscretionary obligations such as mortgage or rent payments, utility bills, etc.  Furthermore, even some so-called nondiscretionary expense such as food can be reduced significantly by making adjustments in your eating habits.   [Note: For suggestions that may help you find ways to reduce your spending, refer to our articles under the category of “Spending Money.”]

3.  Prepare a list of all of your debts.  Include the name and telephone number of each creditor, the balance owed, the interest rate being charged, and both the amount of the monthly payment and the date it is due.

4.  Prioritize your debt payments.  The best financial strategy is to pay more than the minimum, particularly on debts with the highest interest rates, because this will cut interest expenses the most.  On the other hand, there may be a psychological benefit from paying off debts with the lowest balances first, because this will more quickly reduce the number of debts and give you a feeling of making faster progress.

5.  Stay in contact with your creditors.  If you are having difficulty making even the minimum required payments on time, call the creditor to explain your situation.  Most creditors will be more patient if you keep them informed, and they may be willing to waive your penalties, cut your interest rate, and/or adjust the billing cycle for your account.

6. Additional income may be necessary, at least temporarily.  If you are married and only one of you has an income-producing job, it may be beneficial for the other spouse to get an income-producing job, at least until most of the debts are paid. If the spouse who has been unemployed can’t get a job that provides sufficient additional income after taking into consideration the added expenses that would be incurred as a result of having the job, it may be necessary for the spouse who is already employed to get a temporary part-time job, in addition to their regular job.

7.  Decide if it would be worthwhile for you to sell one or more of your major assets. Such assets may include one of your cars or even your house. Certainly, selling a house to move into a less expensive house or an apartment is a difficult decision for most people. Nevertheless, sometimes it is necessary to do so to obtain enough money from the sale and/or from the reduction in both monthly payments and housing-related expenses to help substantially reduce your debts.

8.  Get financial counseling as soon as possible.  Proverbs 15:32 states, “He who regards instruction as worthless despises his own soul, but he who heeds criticism for a fault gets understanding.” And, Proverbs 19:20a advises, “Listen to counsel and receive instruction. . . .” The longer you wait to get financial counseling, the more difficult it is likely to be to get your financial affairs into satisfactory condition. Although you may think you can handle matters on your own, this could be wishful thinking or perhaps foolish pride. A good financial counselor can provide insights to help you understand what is necessary for you to deal prudently with your debts.

9.  Pray that God will enable you to maintain a self-disciplined lifestyle.   One of the characteristics of the fruit of the Spirit mentioned in Galatians 5:22-23 is self-control.  Even if you learn how to make prudent financial decisions, your success will depend primarily on the extent to which you practice self-control when spending, as well as when using credit. Self-control won’t guarantee success in your financial affairs, but the lack of self-control will virtually guarantee that you will be considerably less successful in managing your finances than you otherwise could be.