New year. New me. That’s how the saying goes, right? So, every year people across the country make New Year’s resolutions centered around self improvement. Things like eating healthy, exercising more, or learning a new skill. But there is one key area that people tend to forget about when envisioning a better version of themselves – their debt. Well, no more! According to a recent study from Fidelity, the majority of Americans are considering a different type of New Year’s resolution this year. In fact, 68 percent are making resolutions to get back on track financially, with 41 percent determined to deal with debt this year. What about you?
How to Deal with Debt This Year
Paying extra money toward your debt payments every month is one way to decrease your debt, but not everyone has the expendable income to make this strategy work. And what if you are already behind on payments? What are your options to better deal with debt? Let’s take a look at a few ways to tackle debt in the new year.
Visualize Your Debt & Budget
Many people struggle with debt. And in today’s digital world with automatic payments and debt spread across multiple sites, it can sometimes be hard to really visualize your current financial situation. So, it can be helpful to create a spreadsheet detailing how much you owe, who you owe, and how much interest you are paying. Putting all of your debt together in one place will help you better strategize what to tackle first. Then, you can begin to work on a budget. Write down your net income (what you bring home after taxes), your fixed expenses (rent/mortgage, utilities, phone, internet, credit cards, etc.) and minimum required payments, and estimate your monthly variable expenses (groceries, entertainment, gas, etc.). Then, subtract your total expenses from your income. Which is higher? How much wiggle room do you have to begin to tackle your debt? What can you adjust, if anything, to tip the scales in your favor?
Be sure to keep your budget and debt spreadsheet up-to-date as you move closer to your goal.
Juggle Debt Across Balance Transfer Credit Cards
One common way people attempt to tackle their debt is by juggling balance transfer credit cards. You can consolidate debt from multiple cards to a single card using a balance transfer, and some credit card issuers offer an introductory 0% APR period, typically 12-18 months, to repay debt without paying interest. These offers usually incur a 3-5 percent balance-transfer fee and are only available for borrowers with very good credit scores (often 740 or above). And odds are that if you are already struggling with debt, credit cards may have played a role in getting you there. So, while this strategy may work for some, it’s not right for everyone.
A Debt Consolidation Loan May Be an Option
For those who find themselves with multiple different kinds of debt, credit card, auto loans, medical bills, etc., a debt consolidation loan can be a helpful way to – well – consolidate. These lump-sum personal loans often boast a low interest rate that can help you more easily deal with debt. Of course, these loans often require borrowers to have good credit scores just like balance transfers credit cards. So, this may not be an option for everyone. But if you do go this route, be sure to compare interest rates across multiple lenders to ensure you are getting the best deal possible.
Bankruptcy Isn’t a Bad Word
Chapter 7 bankruptcy can be a great option to help eliminate medical bills, credit card debt, personal loans and to help you get a fresh start, especially if you find yourself falling behind on debt payments. Chapter 7 can help…
- Stop collections including lawsuits, auto repossessions, evictions, wage garnishments and bank account garnishments.
- If your car payment is too high and you want to walk away from your car.
- If you owe old taxes and would like to eliminate them.
- If you want to buy a house in a few years and have too much debt.
- If you want to start rebuilding your credit score.
There are limitations to Chapter 7 bankruptcy as it is the liquidation chapter, so it is important to have an experienced bankruptcy attorney review your assets to determine if they can be protected in Chapter 7 bankruptcy from the reach of a Chapter 7 trustee.
Chapter 13 bankruptcy can be a very real option to help reorganize your debts and give you a fresh start, especially if you find yourself falling behind on payments. Chapter 13 can help…
- If you are behind on your mortgage and the mortgage company refuses to accept anything less than the full amount owed and will not do a loan modification.
- If you are behind on your car payments and the finance company wants to repossess your car.
- If you have many liens on your home and your home does not have any equity.
- If your car payment is high and you wish to lower it.
- If you owe taxes and would like to pay them back over time.
- If you owe child support or alimony and want to pay them back over time.
- If you have certain kinds of debts that are not dischargeable in a Chapter 7 bankruptcy.
- If a friend or family member co-signed on a loan with you and you would like to protect them from creditor action.
Of course, Chapter 13 bankruptcy is not a magical solution that makes all of your debt go away. If you think bankruptcy might be an option for you, consider reaching out to an experienced bankruptcy attorney.
A Maryland Bankruptcy Attorney
Bankruptcy is a complicated process. Consulting an experienced bankruptcy attorney, like Steiner Law Group, can help you understand the bankruptcy process while evaluating your options. We are a boutique law firm in Maryland that assists individuals and businesses with bankruptcy and financial restructuring services. We have helped hundreds of individuals, families, and businesses discharge millions in debt. If you have more questions about Chapter 13 bankruptcy, please schedule a risk free consultation or contact Steiner Law Group, LLC a Baltimore, Maryland law firm at (410) 670-7060 to learn more about bankruptcy options.