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Pay down credit cards or file for bankruptcy?

There seems to be no shortage of advice out there on how to go about reducing credit card debt and polish up a credit report. With the national economy supposedly making a turnaround from the darkest days of the recession, many people may be keen to take up a plan to pay down debts and build up savings. A recent article suggested a few tips for those Escondido readers who may be so inclined to do just such a thing.

First, the article suggests that individuals and families keep close track of all household expenses, as well as exploring avenues for earning extra income. Crafting a budget can help illustrate where funds are being spent and where corners can be cut to bulk up income. Earning extra income is a no-brainer, as the more money that is coming in the more that can be applied toward paying down debt.

The last tips were focused exclusively on credit cards. The article advised attempting to talk with credit card companies about the interest rates on each individual card. Doing do may lead to a temporary or permanent decrease in the interest rate being charged. Further, the article suggests taking full stock of each credit card, then determining which has the highest interest rate and focus on paying the balance on that card first. Only after that card is paid off should large payments be made on the other cards.

Finding a path toward a fresh start will be different for everyone, depending on each unique situation. For some, paying down credit card debt is possible. However, for others, Chapter 7 bankruptcy could be a valid option when the debts are simply too much to bear.

Source: Daily Finance, "Declare Your Independence from Credit-Card Debt," Chuck Saletta, July 1, 2013