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Many bankruptcies are caused by unforeseen emergencies. In fact, the most common catalysts to payment problems are medical expenses, layoffs, divorce, and overspending. Based on this knowledge, there are a few simple things you can do to avoid future problems. 

Obtain adequate insurance
In addition to required insurances, such as auto coverage and homeowners insurance, health insurance is a must. Studies show that the majority of bankruptcies in the U.S. are due in part to medical reasons. 

Establish a savings cushion
Three to six months’ living expenses in an accessible savings account may make the difference between a minor financial setback and a serious financial problem.

Watch your debt ratio
Aim for your monthly debt obligations to equal no more than 20 percent of your take-home pay.

If you do find yourself facing unmanageable debt, bankruptcy may be considered. However, before you file, you might first want to try these other options. 

Adjust your spending
Is it possible for you to make changes that would allow you to pay off this debt? This path may not be easy, but would result in lasting change.

Consider your options: Dept Management Plan (DMP)
Consider working with Money Management International (MMI) to establish a debt repayment program. On a DMP, the terms of your accounts are renegotiated. You agree to include your unsecured debts on the program and make one deposit each month that is distributed to your creditors until your debt is repaid.

Consider your options: Settling debts
You can also try to "settle" your debts for less than the full balance. While paying less than you owe sounds appealing, there are several things consumers need to consider before attempting to settle a debt including income tax obligations. For information concerning debt settlement companies, visit FTC.gov.

Consider your options: Consolidation of debt
A third alternative to bankruptcy is to consolidate your debt. In this scenario, the first hurdle will be to qualify for the debt consolidation loan. If you do qualify, you may be able to obtain a "good" interest rate and the interest may be tax-deductible (for a home equity loan) in the event you used the principal to pay for certain home improvements. However, you also need to consider the length of time it will take you to repay. To understand the true cost of credit, figure out what you will be paying over the life of the loan, rather than just looking at the monthly payment. Be sure to factor in any closing costs.