Tidbits to avoid drowning in debt and bankruptcy

Trying to get out of debt? Don't despair. There are tons of small things that you can do to prevent yourself from going bankrupt, check them out.

Let's say you have $5,000 of debt built up on a high interest rate credit card (perhaps 18 percent) and you also have a $50,000 home equity loan at eight percent interest. You only have so much money to devote to paying down loans each month, so which of these debts should get priority?

• First pay down the high interest rate debt — the credit card — even if it's the least amount of money you owe, say financial planners.
• If you must, just pay the minimum on the home equity loan while you aggressively eliminate the credit card debt. You'll save a lot of interest in the long run.

Ask for a life raft.

Here's something that you'll never hear from a Visa or Mastercard customer service rep: if you owe so much money on your credit cards that you're seriously considering bankruptcy, chances are the credit card companies will strike a deal with you.

Here's what you have to do, according to Laurie Campbell, executive director of the non-profit debt counselling agency Credit Canada:

• Start calling the phone numbers on the backs of your credit cards. When you explain your situation to a credit supervisor, tell the truth: you are ill or unemployed and you're considering filing bankruptcy. The B-word is one that the credit card companies hate to hear.
• If you did declare bankruptcy, credit card companies would usually be left holding the bag. (While bankruptcy may sound like an attractive way to get out of your financial predicament, keep in mind that it seriously blemishes your personal financial record for a long time.)
• Ask for at least a two-month moratorium with no payments, while you try to resolve your financial issues. Request that they note this in your file, and make sure to get the name and direct telephone number of the person you spoke with.
• "You're not likely to get anything in writing," says Campbell, "but at least you now have a personal contact." In some cases, the credit card company may be willing to lower the amount you owe, rejig the monthly payment plan or eliminate interest payments on a long-term basis.
• From their point of view, it's better to get something instead of nothing.