Bankruptcy Law Blog

Thursday, December 24, 2015

Dealing with Too Much Credit Card Debt

When credit cards first came into use, for many they seemed like a lifeline, enabling the purchase of necessary items before the money was in the bank. All too quickly, due to a combination of consumer overuse and the increasingly exorbitant interest rates charged by credit card companies, that lifeline put many in a stranglehold.

If you find yourself overwhelmed by credit card debt to the point that your financial (and perhaps even emotional) life has become unmanageable, now is the time to take some serious steps toward economic stability. It may help you to know that you are far from alone. According to debt statistics released this year, the average U.S. household now carries just over $16,000 work of credit card debt, a number that, unfortunately, continues to climb.

Measures to Help You Regain Control

The first step is usually the hardest one:

Stop Adding to Your Accumulated Debt

While it may be difficult to resist temptation, it is imperative to stop adding to your mountain of debt as you try to get out from under it. Cut expenses wherever you can. Stop using credit cards entirely. If you have been going through a rough patch during which you have needed to pay for essentials, like utility bills, with credit cards, try negotiating a payment plan with the company in question. Another possible solution is downsizing your home, car, or other expenses, or refinancing your home.

Negotiate a Lower Credit Card Interest Rate

Credit card companies don't want you to default, so they are often willing to negotiate a lower interest rate so that you can comply with their demands. Not all credit card companies will negotiate such a reduction in interest, but it may be possible to shift your current balance to a card with a lower (even a 0%) interest rate.
Work Out a Payment Plan

If you are unable to pay the minimum amount of your credit card balance even at a lower interest rate, see if you can't get a deferment on your payments for some period of time, or negotiate a new payment plan. Most companies would prefer having you pay some regular amount, even a small one, rather than defaulting altogether.

Going on a Spending Diet

As with changing any bad habit, one dramatic alteration can sometimes kick-start the process. Some people find going on a "spending diet" for a month or two can be rewarding. Deciding not to purchase anything over a certain amount can also be helpful. Make a firm decision to use the saved money to pay down the existing debt.

Earning More While You Spend Less

It stands to reason that if you find a way to earn more money, you will be able to pay off your debt more quickly. Even a relatively small addition to your income, when applied to your existing debt, can make a significant different over a period of time.

Other methods of relieving overwhelming debt include filing for personal bankruptcy. To obtain help in choosing the best method for handling your credit card debt, you should consult with an experienced bankruptcy attorney for advice and guidance.

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