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Personal bankruptcy can resolve overwhelming debt issues

This is the time of year when consumers nationwide, also here in Ohio, have to face the consequences of their holiday spending. While credit card debt can be discharged through personal bankruptcy, many people spend stressful months -- or even years -- trying different methods of resolving debt issues. In the meantime, penalties and interest rates accumulate, worsening an already dire situation.

Commitment and perseverance could possibly lead to a debt-free state. However, before tackling the debt problem, a consumer must have a clear understanding of his or her overall indebtedness by making a full summary of the outstanding amount, interest rate, term and minimum payment of each debt. The next step is to set an achievable time line and draw up a budget after tracking every cent spent for at least one month. Sticking to the budget is where self-control and commitment will play an important role.

If the budget allows, an individual could then decide on a plan of action by either paying off the high-interest amounts first or the lowest balances, which sometimes motivates people because of quick results. Whatever method is chosen, it can never hurt to ask for a rate reduction, and some creditors may comply. Other options are to transfer existing debts to other types of loans with lower interest rates; however, each option will still involve repayment of the outstanding debt.

If, after the debts are listed and the budget is made, Ohio consumers realize they need more financial help, they may also want to look into the protection offered under the U.S. Bankruptcy Code. An experienced bankruptcy attorney can provide information related to the means test to determine whether the client qualifies for Chapter 7 or Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, some unsecured debts, such as credit card debt, can be discharged while Chapter 13 offers the consumer the opportunity to spread payments over an extended period.

Source: thefiscaltimes.com, "Got Debt? 11 Surefire Ways to Get Back in the Black", Janna Herron, Feb. 17, 2016

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