Getting stuck in a never-ending cycle of credit card debt can be extremely frustrating. If you find that every month you are paying just the minimum balance due or carrying a high balance on your credit cards, it means you are in what’s known as revolving debt. This kind of debt may leave a negative effect on your credit score. However, you may file for bankruptcy to overcome the financial obstacles and get back to living the life you want and achieve your goals.
It is estimated that the credit card debt hit a record high of $930 billion in the United States in 2019, with younger Americans having the highest delinquency rate. Although bankruptcy is often the best available option at such times, you need to be sure it is the right choice for you.
Here are import considerations you should review to relieve yourself of credit card debts quickly:
1. Assess Your Debts
The first thing you should do before coming up with a plan to pay off your debt is to know exactly what you’re dealing with financially. It involves getting your paperwork in line and creating a list of all your debts including bills, loans, and credit cards, along with their interest rates and balances due. It will allow you to best prepare a plan to start working on settling your debts.
2. Select the Right Method
If you have just one credit card and enough income or money saved up to reasonably pay off your balance, you can start by making the biggest payment you can afford each month until you pay off your debts. In case you have multiple credit cards, you can split this amount into monthly payments for each. However, it is important to do this only if your financial situation will allow you to decrease your balances completely or to acceptable amounts over a reasonable period of time. Otherwise, you will only compound the problem by accruing interest on debts that you will never be able to catch up with.
For some people, the debt is low enough, relatively speaking, to pay off. Choose a paying down method – either avalanche or snowball method.
The avalanche method involves keeping as much extra money as you can towards the debt with the highest interest rate first and then moving on to the next one. It allows you to pay your debt off more quickly and save money on interest. The snowball method, on the other hand, involves keeping as much money as you can towards the smallest debt and then moving on to the next one. It may take more time but it helps you see immediate progress while encouraging you to follow through on your payment plan.
3. Debt Consolidation and Settlements
Under debt consolidation, you can take out another form of credit (like a personal loan, home equity loan, or 401(k) loan) to pay off multiple debt balances. It helps you to consolidate various sources of debt into one loan with one payment. However, if you think you can make a large one-time payment, you can try contacting your credit card company or collection agency and negotiate a settlement with them. They may be able to settle your debt for less than the original balance.
If working with a debt consolidator, make sure that each and every one of your debts is included in their payment plan. Folks too often spend a huge amount of money attempting to pay their creditors outside of bankruptcy and then are surprised when they get sued by one creditor who would not participate in the payment plan.
4. Declare Bankruptcy
If you have tried all the above ways and still aren’t able to pay off your debts, you may declare personal bankruptcy. However, it is advisable to seek guidance from a bankruptcy lawyer before filing for bankruptcy as it is a process that should be completed with help of an experienced professional.
There can indeed be several ways of reducing your credit card debt. However, if you can’t get rid of the revolving debt, filing for bankruptcy may be the right choice for you. It will provide you the opportunity for a financial "fresh start" from burdensome debts.