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How to Handle Credit Card Debt and Get Debt Free

August 14, 2019 by Mandy

card debt is nothing new. Millions of people around the world are getting themselves into ever greater levels of it.

Indeed, consumer debt recently surpassed the almighty $4 trillion mark.

That’s a scary figure, and a shocking level of debt to find ourselves in. Of course, being in debt is no laughing matter. With crippling interest rates and a never-ending list of repayments to make, life can quickly become one giant financial burden.

It’s in everyone’s interest to get out of debt as quickly as possible. However, that often feels like an impossible task. Thankfully, it doesn’t have to be.

With a few sacrifices and a sensible approach, you can haul successfully get debt free in a relatively short period of time. Sound good?

Keep reading to learn exactly how to handle credit card debt to become debt-free quickly.

1. Know the Damage

Debt can feel scary.

Instead of confronting the issue and dealing with it, many people simply choose to bury their head in the sand. Unfortunately, all that leads to is a worse situation down the line.

The first step towards getting out of debt is understanding how much you owe.

As in, the total amount! How much credit card debt are you actually in? You’d be surprised how many households around the country have no idea. They just keep spending, missing payments, and perpetuating the cycle.

Now isn’t the time for estimates, either. Guessing isn’t good enough! Ballpark figures won’t help. Sit down and get real. Write down the sum total of all your credit card debt.

It can feel scary. However, be brave! Doing this is absolutely vital to creating a plan of action.

2. Figure Out Your Finances

Hopefully, you’ve now got a figure to work towards.

Well done! Scary as that number might seem, you’ve made great progress.

Now, though, it’s time to take stock of your monthly income and expenses. It’s essential that you know where your money comes from, and where it goes. Indeed, this is the first rung up the ladder to cut costs (more on this later).

Sit down and take a look at your cheques and balances. How much do you earn on a weekly and monthly basis? How much do you spend in total, and in what areas of life?

This data is central to understand how to hone your monthly expenditure. You might need to take a week or two to track your spending. Indeed, there are many phone apps that can help. They’ll sync with your bank account and keep tabs on your spending habits.

3. Contact the Credit Card Companies

Okay, now you know where you stand in terms of debt and expenses.

Next up, damage limitation.

Each of your credit cards will have a certain rate of interest attached to them. That’s why the amount you owe always goes up so fast!

Call up the credit card company to discuss the rates you have. From there, ask if they’re any way of cutting them down. Sure, your credit rating may play a role in how likely this is of happening. Poor credit means it’s less likely. However, it’s always worth a shot.

You’d be surprised at how much you can save with even small rating cuts. Remember, don’t ask, don’t receive. There’s no harm in trying.

4. Start Cutting Costs

Let’s face it, there are only really three ways out of debt:

  1. Spend less (save more)
  2. Earn more
  3. Combination of 1 and 2

Option three will be most conducive to getting out of debt quickly. However, you might not have that luxury. Your income may be fixed, and the job market may make it hard to secure more money.

The easiest approach is usually to spend less money!

You now know exactly where your money goes. That’s a major help in determining when you can save. Maybe you go out for dinner a lot. Perhaps you pay through the nose for your phone bill each month. You might have masses of useless subscriptions that hemorrhage money each month.

Whatever the case may be, look for opportunities to cut costs.

Eat in. Stop paying for the gym. Downgrade your mobile phone. Stop going out all the time (or go out less often). And so on.

Remember, the more you cut, the more you can redirect to paying off your debt.

5. Sell Your Possessions

Sometimes you need money quickly. Selling your stuff can be a good way of getting extra money.

Sure, this may not be ideal! Likewise, it isn’t a long term solution to your debt problems. However, if you’ve got more than you really need, and could do with a decluttering, then it may not be a bad idea. It’s a definite way of getting a cash injection that can help out in desperate times.

Likewise, if it means earning enough extra cash to pay the next few months’ credit debt, then it’s worth considering.

Hold a yard sale, advertise on Craigslist, and so on. Of course, another way to pay off credit cards and get money quickly is taking on another loan. However, hesitate before doing this. Sure, you get funds quickly (and if the interest payments are lower, then it’s arguably worthwhile). That said, taking on more debt is rarely the best solution to having too much debt in the first place!

6. Start Paying Off Your Debt

Taking action is often the hardest part.

It’s easier to pretend there isn’t a problem. The first step is the hardest though. From there, you gather momentum and gradually snowball to success.

It’s time to start paying off that debt.

You have two options. Arguably the most sensible is to direct all of your newfound cash to pay off the highest interest credit card first. On all of your others, keep up with minimum payments.

This may take a reasonable amount of time. However, getting rid of the highest interest card is a big win. When it’s paid off, you’ll have more cash to direct to the others.

Final Thoughts on How to Handle Credit Card Debt

There you have it — exactly how to handle credit card debt and get debt-free.

Credit card debt is crippling households around the country. Unfortunately, it’s all too easy to get into debt; getting out of it is the problem! High-interest rates and exorbitant fees for missed repayments can quickly add up to a problem.

Thankfully, getting out of debt is absolutely possible. Hopefully, this post has highlighted how to do it.

Want more posts like this one? Head to the finance section on the blog now!

Filed Under: Finance Tagged With: debt, debt advice, debt free, finance, money

Debunking 3 Myths About Bankruptcy Designed to Terrify You

March 1, 2019 by Mandy

Every parent who is worth their Dora the Explorer purchases knows that, sometimes, it’s necessary to bend the truth when dealing with their kids.

For example, while it would be ideal for kids to grasp that going to bed vs. staying up to watch TV is best for their health and long-term growth and development, a more pragmatic route typically involves conjuring up a monster of some sort who goes from house to house in search of kids who stay up past their bedtime. Is this lying? Yes. Does it work? Yes!

However, there are other myths that aren’t fundamentally ethical. Instead of pointing (okay, manipulating) people towards making smart choices that are best for them, these myths are designed to mislead and ultimately harm people. And in the grown-up world, there isn’t a better — or make that worse — example of this then when it comes to terrifying bankruptcy myths.

Here’s the thing: the fundamental purpose of bankruptcy law is not to punish debtors who can’t pay some, most, or maybe all of their bills. This isn’t the 1800s, and debtors’ prisons don’t exist anymore. Rather, the point of bankruptcy law is to provide debtors with legal protections so they can, eventually, restore their financial health. In other words, it’s not in society’s best interest for debtors to sink deeper and deeper in debt.

And so, if society doesn’t have it in for debtors, who or what is behind the scary bankruptcy myths that we’ll debunk in a moment? Why, creditors of course! They don’t want individuals and businesses that owe them money to file for bankruptcy, because once that happens creditors must immediately cease all communications and collection activity (e.g. lawsuits, wage garnishment, etc.).

What’s more — and far more egregiously to creditors — they must stand in line beside all other creditors and wait their turn to (in most cases) get a fraction of what they’re owed. Creditors hate that. They’d much rather intimidate and exhaust debtors into paying all or most of their overdue bill. In this respect, and quite strangely, the biggest threat for creditors doesn’t come from debtors. It comes from other creditors who also want a piece of the pie.

And so, now that you know that creditors are behind the horror story of bankruptcy, let’s look at three myths that many of them tell debtors, so they can get their money as quickly as possible and run away:

Myth: Very few people qualify for bankruptcy so you shouldn’t even bother.

Truth: Virtually anyone who passes their state’s respect means test can file for Chapter 7 bankruptcy protection. And if they do not pass the means test (because of a relatively higher income level), they can still almost certainly file for either Chapter 13 or Chapter 11 bankruptcy.

Myth: If you file for bankruptcy then you’ll lose everything.

Truth: Chapter 7, Chapter 11, and Chapter 13 all provide for exemptions that may allow debtors to keep assets, such as their primary residence, some personal items, and registered retirement funds. For Chapter 11 and Chapter 13 filings, debtors will be able to keep their car provided that they make timely payments during the reorganization plan.

Myth:  Filing for bankruptcy will permanently destroy your credit score.

Truth: Filing for bankruptcy will result in a significant credit score hit (the exact amount depends on the credit score at the time of filing — the higher the initial credit score, the larger the hit). However, it will not permanently destroy your credit score. You can apply for secured credit cards immediately after discharge, and within a few months you’ll be eligible for conventional credit cards— albeit at a pricey interest rate. Provided that you make full payment (not just the interest!), then your credit score will start to rise, and within about a year or so after discharge you can apply for a conventional credit card. After a couple of years, you can apply for a conventional mortgage, and then you’re fully back in the game. Chances are your credit score within a few years of bankruptcy will be higher than before you files, because you’ll have much better earning, spending and saving habits.

To learn more about bankruptcy facts — and just as importantly to learn more about bankruptcy myths — then check out the blog at charleshuberlaw.com. There are hundreds of easy-to-read articles on everything from how to file for bankruptcy, to how to deal with aggressive creditors, and more. Simply put, it’s the blog that creditors don’t want you to read!

Filed Under: Finance Tagged With: bankruptcy, debt advice, finance, money

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