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Bankruptcy is the best choice when debt is overwhelming

Florida residents are building up excessive credit card debt consistent along with the rest of the country. When repaying debt, there are some options for making smart repayment choices that should be heeded. However, if the debt is so overwhelming that it cannot be paid off comfortably within the next five years, the borrower may be best off filing for bankruptcy relief.                                                                                                                             

There are some tips for paying off debts correctly, but do not get too excited. If one does not have sufficient income, the suggestions will have little effect. The secret to these techniques is in having money left over each month after paying the minimum amounts due on existing debts.

For example, after making all the minimum payments, it is best to focus on the high interest credit card payments first. To keep carrying accounts with very high interest accumulations is to nurture the vice-like grip of burdensome debt. It is suggested that the borrower make a list of all debt accounts, with remaining balances and interest rates, and focus on the high interest rate accounts first. This is called the "debt avalanche" method.

However, some debtors will feel more comfortable going after those accounts with the smallest balance due. Paying that smallest balance will get one account paid in full, which can be a great psychological motivator. Then just move down the line and pay the loans one at a time, based on approaching those with the lowest balance first. That last technique is called the "debt snowball" method.

The snowball method may be rewarding psychologically, but it pays more in interest rates over the long-haul. In addition, debtors will want to avoid using a debt relief or debt consolidation company. They tend to take whopping monthly cash payments from the borrower and then not pay off the debt in an organized or timely manner. In the end, bankruptcy is the best choice for Florida residents whose net income is insufficient to pay off all debts through a plan. Instead of being burdened by unwieldy monthly payments, one can eliminate all unsecured debts permanently in a Chapter 7 bankruptcy without paying down the balances.

Source: U.S. News & World Report, "Debt Repayment Guide: Everything You Need to Know About Repaying Loans", Susannah Snider, Jan. 12, 2018

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