Don’t hit the bankruptcy ‘panic button’ until you have to. Life’s pretty good at throwing curve balls. And whether it comes disguised as a lost job, a health problem or some other unforeseen calamity, all too often that curve ball comes wrapped in financial woe and worry. Suddenly, questions like “How are we going to pay the bills?” and “Do we keep the kids or the cat?” take on far greater relevance than they used to (okay, so not the second one – but you get the drift).

While indebtedness is for most of us a fact of life – how else could you afford that nice home and a new car? – There may come a time when, usually through no fault of your own, you find yourself overwhelmed by debt. And for an ever-increasing number of Canadians, the sinking feeling that accompanies the inability to pay their bills can mean only one thing: bankruptcy.

But before hitting the bankruptcy ‘panic button’, be sure to conduct an honest assessment of just how bad your debt problem is. It can be as easy as making a list of who you owe money to and how much (if possible, include details of interest rates, monthly payments, and the term). Be sure to check whether your credit history has suffered (services such as those offered by Equifax and TransUnion can provide the answer), and determine whether it can: a) be fixed, or b) be prevented from getting any worse. Only then can you properly begin to understand your options?

And while bankruptcy might ultimately be the answer, it shouldn’t be your first recourse. The following tactics are worth considering to avoid going that route:

– Start a budget: Knowing where your money’s going can be a good way to stop the bleeding, enabling you to identify problem areas while targeting (and cutting out) unnecessary spending. Yes, you’ll need to be disciplined, but for many it’s enough to make a positive change to your bottom line.

– Restructure your loans and mortgages: It certainly doesn’t hurt to see if you can free up cash by deferring a car loan or mortgage payment – most financial institutions are happy to help by pushing back one or two monthly payments (usually for a fee), which may be enough to help in the short-term. Alternatively, look into a lower interest / lower payment option that might spread the debt out over a longer period of time.

– Take stock of your assets: Document anything of value – be it land, your vintage 1962 Mustang, or that collection of Disney originals Great Uncle Walt gave you. Don’t be tempted to sell them until you’ve had your situation assessed. These assets could be used to fund a consumer proposal that may, in turn, save you from filing bankruptcy.

If, after all, this, you’re still not sure you can figure your own way out of your financial problems, don’t hesitate to seek professional help.

And remember: simply ignoring the problem won’t make it go away.

LCTaylor Licensed Insolvency Trustees, www.lctaylor.com