If you have credit debt that seems to have taken over your life, you’re not alone. On average, Americans own approximately three credit cards each, and may have debts of $5,000 or more.
Debts usually start low among younger Americans, but by the time they reach 45 to 54 years old, they top out. Those are years when people earn the most, so they can afford to maintain a higher level of debt. As Americans age, the debt usually drops again. It’s normal for those in retirement to use their credit cards less and to live on a fixed income, which means they have to be more cautious with their budgets.
What can you do if your debts are simply too high to repay?
Life happens. Sometimes, debts get out of control. You might have lost a job or be unable to work as much as you used to. If your debts are out of control, you can:
- Consider bankruptcy
- Negotiate with creditors
- Try the snowball method
- Consolidate payments
While bankruptcy might not be the primary option for many people, it is wise to seek guidance about how it can help. Generally – based on assets and disposable income – individuals can file either Chapter 7 or Chapter 13. Chapter 7 bankruptcy is also known as “debt elimination.” Conversely, Chapter 13 focuses more on reorganizing and repaying debt. Depending on your personal situation, one of these plans might be better suited for you than the other.
If you want to, you can attempt to negotiate with creditors to lower your monthly payments, lower your interest or ask for forgiveness on a missed payment. If creditors know you’re struggling, they might be willing to work with you to get you back on track. They don’t want to risk having to write off the debt in the future.
3. Snowball your debts
The next option is to snowball your debts. With this method, you start paying more on a single debt each month until you pay it off. Pay your minimums on everything else. Once the first debt is paid, take what you paid on it each month and apply it to your next debt until they’re all paid in full.
The last option is consolidation. Debtors should be aware, though, as Chapter 13 is the only government-protected method of debt consolidation. Many financial organizations might offer this service, but there are no guarantees your creditors will agree to the terms – and no protections in place if you face increased financial trouble.
These are four techniques to help you get in control of your debts. The right debt-repayment plan can help you get back on track. Consider your options and look to an experienced bankruptcy attorney to explain your options to attain financial freedom.