Baxter, now 27, made the admission in a revealing interview with BBC Football Focus, which airs this weekend ahead of Monday’s Sheffield Derby which sees his old club travel to Hillsborough to face city rivals Wednesday.
Baxter, now back at Oldham, joined United from the Latics after coming through the ranks at Everton, where he became the youngest player in the Premier League club’s history when he made his first-team bow at 16.
He scored for United in an FA Cup semi-final defeat to Hull City but was suspended by the Blades after failing his first drugs test. He convinced an FA hearing that he had been spiked and returned to action with United, before failing a second examination after testing positive for cocaine.
“It came out in the press, and then family members knew and they all started to ask if I was okay,” Baxter said.
“I remember once going to the local supermarket in Sheffield, and a lady saying to me she had to tell her son that her favourite player had been a naughty boy. It felt like the whole world was caving in on me. It was just a really lonely place to be in.
“For me, the thing to do was to shy away from it, to go out and try to get that feeling of being drunk or something - to taking my mind off everything closing in again. That's when the second one [drugs ban] came about.
“I was trying to stay in my own bubble and not have to explain myself to people. I thought that was the easy way. Obviously it wasn't. Knowing that now and being able to speak to people, getting things off my chest is much easier to do.
“I was 100 per cent at rock bottom. Back then, I was planning to kill myself.
“My partner was going to work and I would put on a bit of a front by saying that I was OK. As soon as she left for work, I would switch the light off in the room and just be lying there for hours on end, thinking of silly stuff.
“Then I realised one day that I could feel sorry for myself or I could get up and do something about it.”
Baxter found solace at his local gym and then was handed a lifeline by Everton, who offered a 12-month contract in their U23 side.
He then returned to Oldham, who recently appointed Manchester United legend Paul Scholes as their new manager.
“I am still quite young,” Baxter added, “and I still believe I've got a lot to give to the game. I'm keeping fit. People think 'you were lucky' but if I had been out of shape when I got that phone call, then this day would never have happened.
“I dragged myself up from rock bottom. I had good people around me - my family, my partner, my partner's family - and I met a new bunch of lads in the gym and my little daughter came along as well. Everything is sort of on the way back up.
“My daughter has given me a new lease of life. Sometimes I had a bad day in football and take it home with me and now I don't.
“[At Everton] I was young, stupid. I had quite a lot of success in my early years and I think that brought the wrong crowd in terms of people, the yes men. I didn't have the type of people telling me, 'No, that's the wrong thing to do.'
“It's something that I have learned from. It's made me a lot wiser, a lot more grown up. It's something that I can use as a positive when I'm speaking to younger footballers on what not to do.”
The full interview with Baxter airs on Football Focus on Saturday at 12pm.