So how do you reduce the risk of needing to see a bankruptcy trustee?

The simple answer is don’t spend more than you make. Exceptions to this rule are obviously large-ticket items that require most people to borrow, like a car or home.

Make a budget and stick to it.

Pay off your credit card/line of credit/other bills every month or when due. Keep an emergency fund (most financial experts feel the equivalent of three months’ salary is adequate) that’s easily accessible.

If you do find yourself falling behind, contact your creditors and explain the situation. They’ll often be open to extending the time to pay off a debt. Some will even lower their interest rate, if asked.

Generally, if you miss one payment, you’ll receive a reminder. The second missed payment will often come with a more insistent request for payment and a third one will often send the bill to a collection agency.

It doesn’t do you any good to ignore these people since they won’t go away. They get paid when they collect, and when phone calls don’t work; they can ask to have your wages garnished.

A poor credit rating generally stays with you for seven years. There are things you can do to improve your rating:

Pay all your bills on time, and don’t bounce cheques.

Get a secured credit card. The bank requires you to have money in an account as security, which it can use if you miss a payment.

Get a small line of credit to pay bills, then immediately pay it off. Do this regularly and your credit rating should improve.