Credit card debt can be frustrating to no end and is easily one of the most common debts individuals who later file for bankruptcy find themselves battling. Every situation is different, and while there is not a single solution for getting out of credit card debt, certain tips and tricks can help individuals who find themselves drowning in this type of debt.
- Use All Resources to Pay the Debt
The most common method used in the past was to take all resources available to pay off the debt. While it is an effective method, it is one that requires a lot of dedication, as well as a lot of time. It starts with the individual cutting up their credit cards and using cash only to pay for essential living expenses. It is recommended that the person first sit down to make a list of all cards he or she has, writing down the interest rate for each card, as well as the minimum payment on each.
Utilizing what is known as the “debt avalanche” method, the person targets one credit card balance at a time. This means that the person pays the minimum payments on all other cards with the exception of the first card with the highest interest rate. To come up with the amount the borrower can afford to pay towards this car, he or she will need to create or revise a budget, eliminating all unnecessary expenses, and see what amount is left after all living expenses are covered. The person will throw all of the money towards the first debt, and as soon as that debt is paid, the card with the next highest interest rate is handled and so on until all debts are paid.
However, when the card’s interest rate is too high, the individual has too many debts to handle or he or she has no extra money to contribute to paying the cards off, other options may need to be used.
- Balance-Transferring Card
If the individual still has a good credit score, it is possible he or she could transfer the balance from one or more of these cards to a newer one with a lower interest rate. Many cards offer a limited-time 0 percent annual percentage rate for a certain period of time and waive a balance transfer fee during this period. This time period can allow the payer a chance to catch up without the debilitating interest rates preventing any progress. However, the key is the person needs a good credit score, as well as savings or funds available to pay off the balance during this period of time with 0 percent APR.
- Credit Card Consolidation Loan
Sometimes paying off the credit card debt can be too much to pay without help. In these situations, credit card consolidation loans are a possibility. According to Bankrate, the average rate for these loans is 16.84 percent for credit cards these debtors are facing, which can be near impossible to conquer. A credit card consolidation loan allows the person to pay off the credit card balance with a loan for the same amount but a lower rate. The rates for these loans start around 10.00 percent with lower fees than the credit cards. These personal loans are available for borrowers with less than perfect credit, but the borrowers will need someone to cosign the loan or at least put up collateral to cover the loan.
- Debt Management
Another option is for the borrower to enroll in a debt management program or plan (DMP) and receive assistance from a credit counseling service. A qualified credit counselor will work with the individual to put together a budget, create a plan to pay off the debt and to work with the creditors to negotiate the debt. Also, under a DMP, the person will consolidate the debt into one monthly payment with a small monthly fee that is capped by the state. This option is available for individuals with poor credit, and the process can take approximately four to five years.
It is important that the person find a company who is qualified, such as the Financial Counseling Association of America. If a company promises the debtor that it will be able to completely get rid of the debt, it is likely a scam. Do the homework before choosing a company.
- File Bankruptcy
Sometimes, the individual has no choice but to file for bankruptcy if the amount of debt is too much to handle. It is at this point that a bankruptcy attorney needs to be consulted. An attorney can help the person determine whether other options exist, and if no other option does exist, the attorney can advise the individual on what type of bankruptcy is best for his or her situation, whether that be Chapter 7, 11 or 13 bankruptcy.
If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com