Among the many promises people make to themselves, getting out of debt and getting personal finances under control are two of the most common. Whether a job loss, illness or unexpected medical bills caused the problem, more and more people find themselves struggling to stay afloat.
Prioritize and Budget
While the problem may seem overwhelming, there are steps people can take to get out of debt. Many financial experts advise people to prioritize their debt. If you have multiple credit cards with large balances, for example, examine your statements to determine which card has the highest interest rate and focus on paying down the most expensive card first.
The Federal Trade Commission (FTC) also advises people to develop and stick to a budget. Determining which expenses are fixed (like a mortgage, insurance and car payments) versus those that are discretionary can help identify harmful spending patterns and trends. The FTC also recommends contacting your creditors. In some cases, they may be willing to work with you and develop a payment plan which can help pay down your debt.
Clean up Credit Reports
When struggling with debt, obtaining more credit seems like the last thing that should be on a person's mind. But experts note that taking steps to clean up credit reports now will make obtaining credit easier later on. A study by the National Association of State Public Interest Research Groups, found that up to 79 percent of credit reports had some sort of error in them and up to 25 percent of those errors resulted in the denial of credit.
Working with an Attorney
Due to the uncertainty in the economy, the statistics collected by the credit reporting agency TransUnion indicate that many people have already taken steps to reduce the amount of debt they owe on credit cards. In the second quarter of 2010, the average amount of personal credit card debt owed by consumers fell to an eight-year low. While many people are making progress paying down their debt, people still owe an average of $4,951 on their bank issued credit cards.
Despite the best of intentions and desire to pay it back, people often find themselves with overwhelming debt. If you find yourself behind on your mortgage or falling behind on credit card payments, it is important to discuss your situation with an experienced bankruptcy attorney . There are options, and a bankruptcy lawyer can help determine which path is right for your situation.
