While credit card debt is not one of the main causes of bankruptcy filings, it can be a major contributor.
Bankruptcy filings have, thankfully, been on a downward trend since their peak in 2005, but almost 600,000 people still filed in 2020.
The most common reason for a person to report when filing bankruptcy is a loss of income, which makes logical sense. When someone loses income, they are sometimes unable to keep up with their expenses. This issue is compounded when someone has a lot of debt, either from medical bills, student loans, or credit cards.
If you are struggling with credit card debt because of a recent loss of income, remember than bankruptcy should always be considered a last resort.
There are credit debt solutions that you can use to avoid bankruptcy and find financial health again. The tips in this post can serve as a guide, but if your credit card debt is enough to consider bankruptcy, you need to seek professional help sooner rather than later.
Obviously, the best way to maximize your income is to eliminate as many expenses as possible. Putting more debt onto your credit cards will only make things worse. That means cutting spending to just the bare minimum necessities. The expenses to prioritize are:
- Housing/shelter/utilities – Without a comfortable place to sleep, your financial situation will get a lot more dire.
- Food – If you’re having trouble affording groceries, find a food bank in your area.
- Transportation – If you have a car, make sure you keep it as reliable transportation is key for employment. If you don’t have a car, or can’t afford the payments without sacrificing housing or food, find public transportation options in your area.
- Insurance payments – Losing health, home, or auto insurance coverage will only compound your stress.
- Family expenses – Child care is necessary for working parents. If you are able to enroll your child in a free Head Start program, that is a great option.
- Phone – Again, having communication is a necessity for work. The government provides funding for free cell phones through the Lifeline Assistance program. See if you quality here.
- Personal care items – Necessary medications, work clothes, and other expenses that keep you looking presentable for work are the priority.
A bare minimum budget is hard. Take advantage of programs designed to help people who are struggling. Remember, there is no shame in asking for help!
Don’t “Consolidate” Your Debt
Debt consolidation sounds like a good option, but in fact it is just another loan. Learn more about why debt consolidation is not a good option here.
One of the worst ways to spend your money is paying back creditors with high interest rates. The average credit card interest rate in 2020 was 17.87%.
If you have $10,000 in debt with that average interest rate, and you paid $400 per month towards the debt, you’d end up paying an extra $5,800 before paying it off completely.
ACRO Services, LLC provides credit debt solutions that are legal and permanent for our clients. We work with you using your rights as a consumer to relieve your debt and set you on a better path.