HOME
Debt Management
In times of a bad economy, budgets get stretched and debt builds. Credit cards are a big contributor to debt becoming unmanageable. It is best to stay on top of debt before it gets overwhelming to avoid filing personal bankruptcy. When making difficult decisions regarding debt management, be informed about the following:
- Paying off credit cards
- Ways to get out of debt
- Filing personal bankruptcy
PAYING OFF CREDIT CARDS
You may need help paying off credit cards if doing it on your own can’t be done in a timely manner. To pay off credit cards:
- Immediately STOP using your credit cards. There is no need to cancel them because it can have a negative affect on credit scores.
- Move the balance from the highest interest card to lower interest cards.
- Pay the minimum on the lower interest cards on time.
- Focus on paying as much as possible on the remaining balance of the high interest card until on the highest interest card until it is paid off.
- Repeat with next card in line
Change the process if you are focusing on credit repair. Get the credit card balance under half the available credit, then move on to the next card and do the same. Have the balance be safely under half so that monthly charges or interest won’t push the balance back up over the half way mark. Once all balances are safely under the ½ way mark, go back to the highest interest card and work on paying off the balance.
WAYS TO GET OUT OF DEBT
Debt reduction is a goal for almost everyone but everyone doesn’t have the self-control needed to reach the goals that will free him or her from debt. Debt counseling can reduce the time it will take to reduce debt and provided support and instruction on ways to get out of debt.
Don’t start any plan to reduce debt, until there is a commitment to not create any new debts. Ways to get out of debt:
- Debt consolidation
- Aggressive budgeting
- Debt negotiation
- Bankruptcy
- Debt management
- Debt counseling
FILING PERSONAL BANKRUPTCY
The word bankruptcy can be scary enough and the thought of actually filing for bankruptcy can be terrifying to some. Be sure to research all other options before choosing bankruptcy. If after researching, you decide that bankruptcy is the way to go, at least you can find peace that it really was the only way to get out of debt.
Common types of bankruptcy:
- Chapter 7-liquidates assets to pay debt (some assets may be exempt)
- Chapter 11-reorganizes debt for a business to maintain business and pay off debt.
- Chapter 13-restructures debt to pay debt (some debt is exempt from restructure)
Avoid filing personal bankruptcy whenever possible. A bankruptcy can stay on credit reports for up to 10 years. This can interfere with getting a job that includes a credit check in the pre-employment screening.
Avoid unmanageable debt by getting out of debt as soon as possible.
