Over the last year, due to the recession, many of us have become very familiar with the words credit, debt, loans, interest, bankruptcy, etc. After the Great Depression in the 1930s the current recession has been the worst financial crisis. Many people suffered huge losses due to the still ongoing recession. In many cases the losses were so great that they had to file bankruptcy.

The recession started off in the United States due to the high rate of mortgages being defaulted. The rising rates of interest were a major cause behind the increasing amount of people defaulting on their mortgages. This then lead to the credit crunch which affected several industries. A major industry that was affected by the credit crunch was the automobile industry. That automobile which depends on credit sales such as hire purchase agreements and leasing, lost a large portion of its revenue and therefore started to crash.

The United States being one of the most important countries in terms of international trade eventually had its inevitable effect on the rest of the world. As a result, other countries had similar effects. Rise in the rate of unemployment, increase in prices of goods etc. People all around the world struggled to pay their mortgages and keep their houses.

Many people in the retirement age, surviving off pension funds really suffered due to the increase in prices of goods, increasing interest rates on their mortgages and had to give up their homes and again in many cases were forced to file bankruptcy.

Financial experts say that with careful observation people can easily avoid having to file bankruptcy. The first measure a person can take to prevent having to file bankruptcy is to destroy credit cards. Credit cards are one of the major causes of excess debt. Credit cards encourage splurging and a majority of the public usually end up spending more than they can afford. This excess spending, results in huge credit bills and sometimes being unable to pay it off and having to file bankruptcy. Secondly, it is best to avoid buying more houses than one can afford. Interest on mortgage payments can be really expensive and in the event of the person not being able to pay, they will either have to give up the house or other securities, or file bankruptcy.

Credit counselling is recommended by many experts as it informs people of their financial status and allows them to make intelligent choices on their credit spending.