There are a large number of so-called debt settlement agencies advertising services that boast that they can help you avoid a Chapter 13 bankruptcy in Colorado Springs.

If you have overdue medical bills, late car payments and credit cards with sky-high interest, you know you have to take some form of action. And it can be tempting to want to avoid any negative marks on your credit.

But Colorado Springs bankruptcy lawyers know that first of all, a lot of these companies pose a buyer beware situation. A lot of them charge high rates for actions you may be able to take yourself, and some have even been pursued criminally for fraud.

A Chapter 13 bankruptcy, on the other hand, is a federally-approved process that is overseen according to strict legal standards, and when it's all done, you are free from debt.

The other thing about a Chapter 13, versus a Chapter 7, is that lenders and other institutions tend to look upon it less harshly because you are actually paying off a good portion of what you owe. Additionally, you have the protection of legally blocking your creditors from harassing you or coming after you for more once the process is done.

Now, if you decide to go with a debt settlement or credit management company, as mentioned before there is always the possibility of fraud. But also, you're generally going to be looking at higher monthly payments than what could be arranged in a Chapter 13 plan. Plus, in a Chapter 13, you're paying back a portion of the debt, rather than all of it, which is what you'll do with a debt management plan.

With a debt management plan, you're also looking at likely paying on those debts for a longer period of time. Plus, your creditors might not all agree to the terms of the plan (whereas in a bankruptcy, they would be legally compelled to do so). This is probably going to mean you'll be paying higher fees and balances for those agencies.

And also, it's not clear that there's really even much benefit to your credit score, as debt management plans are also reported to credit reporting agencies.

As we close in on the holiday season, it's easy to get in over your head with credit card spending. According to Yahoo! Finance ("Top 5 Reasons Why People Go Bankrupt"), poor use of credit is the third most likely cause of bankruptcy.

When credit comes easy, some people just cannot control their spending. Before they know it, credit card bills, installment loans, car payments and "same as cash" plans become a burden too heavy to carry. If the borrower is unable to make minimum monthly payments on this debt, or secure a debt consolidation loan, bankruptcy becomes the inevitable alternative.

Statistics show that even when some borrowers consolidate credit card debt, this only delays the inevitable bankruptcy filing. While a home equity loan might be worth considering, it's never smart to overuse this option. If this payment becomes unmanageable as well, borrowers may find themselves facing foreclosure.

The lure of overindulgence

Just like we eat too much between Thanksgiving and New Year's Day, Americans also tend to spend too much. It's no surprise that every January 1st we all "resolve" to put an end to these vices, but it's much easier to eat healthier than it is to break our spending habits. Even the most financially savvy adults tend to rack up large credit card bills during the holiday season.

A little self-discipline

Although it's tempting to spend more than you can afford, a disciplined approach can help you maintain financial sanity.

Why limit holiday credit card purchases? Simply put, credit cards give the illusion that you can buy more. Even if you shop for bargains, gifts bought on credit cards end up costing more money. By the time you add in the months of finance charges, you will ultimately pay a lot more for these gifts than if you had paid cash. High credit card balances affect your credit score too, especially if you are spending more than 30 percent of your credit limit.

8 Tips for Avoiding Holiday Debt

Stick to these spending principles and you will keep your holiday spending to a minimum. Here's how to put them into practice.

1. Save up first – Paying cash instead of using a credit card will help you avoid holiday debt all together. If it's too late to start saving for this year, start it in January. Put aside a little something each pay period and use that to finance your holiday purchases. Most people find that they spend more wisely when they are paying in cash.
2. Set up a budget before you start – The savviest holiday shoppers plan purchases in advance. Don't just go out to the stores, armed with coupons, and start shopping. Decide first what you will buy for each person on your list, and how much you are willing to spend. No matter how tempting it is, use discipline and don't go over your budget.
3. Make a list and check it twice – We've all heard that popular song about Santa making his list, so why not do the same? You may be known among family and friends for your generosity, but that doesn't mean you need to spend more than anyone else. Why not spend more time being creative about your gift-giving. Consider handmade gift baskets, fancier wrappings, home-baked treats, or unique and meaningful gifts? In the end, these gifts will be more memorable than that pricey designer sweater.
4. Use layaway – The ease of personal credit caused layaway to disappear for a few years, but it's making a comeback. Many larger retailers, such as Walmart and Kmart, are bringing it back into fashion. When you start shopping early enough, it's possible to pay a little bit toward your holiday purchases each month, thereby paying for them completely before the holidays.
5. Don't shop for yourself – This is probably one of the hardest things to do during the holidays. With all those "doorbuster" specials on Black Friday and all the time spent in stores, it's easy to double your holiday purchases by shopping for yourself. Save your personal purchases for the post-holiday season. No matter how great the prices are now, they will be even more enticing on December 26th, and by that time you may have received what you wanted from others.
6. Shop online first – Shopping online is a more "directed" and "considered" activity, making it harder to buy on impulse. By browsing a store's inventory online, you can quickly decide what you really want to buy before you leave the house.
7. Leave your credit cards at home – When credit cards are removed from your wallet, you will be forced to use the money you already have. It is much easier to stick with a budget when you are shopping with your available cash. If you must use a credit card for purchases, pick one card and set a realistic spending limit for your shopping trip.
8. Only buy what you can afford to pay – Here is a sobering way to view credit card purchases: You are borrowing from your future income. The only way to get ahead financially is to live in the present moment with your purchases. This means if you cannot afford to pay your balance off next month, you are mortgaging your future. Think about it. Do you want to pay for this momentary until next holiday season?

These tips can prevent you from falling victim to credit card debt, one of the leading causes of bankruptcy.  For more information on personal debt managment and bankruptcy, consult with a Colorado Springs bankruptcy lawyer.