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Credit debt and you - what is the best path to a fresh start?

Millions of Americans struggle with credit card debt every year. Although credit problems don't always lead to a bankruptcy filing, struggling with a high credit balance can be more than many would care to think about. A person's credit rating is still important in this country, even as America's own credit rating has been called into question in recent years. With that in mind, a recent article detailed a few tips that many of our California readers may find useful in an attempt to get a handle on credit debt and move toward a fresh start.

The first tip is a broad one, applicable to many problems beyond credit debt - acknowledging that there is a problem. If a person is running out of room and getting close to their credit card limit, or if a house and car payment are taking up way too much of a person's take-home income, there might be a problem with the household finances. Acknowledging that the problem exists is often the first step in correcting it.

The next tips are to design and maintain a budget, and consider the impact that interest rates have on the overall debt burden. A budget will lay out all of the household income, as well as the current monetary obligations, with the point being to avoid committing to further expenses while also saving where possible for extra funds to put toward reducing debt. Interest rates on credit cards and loans can vary significantly, so it can often be a good idea to pay off the balances with the highest rates, even if the balance is on the low side. It could cost more in the long run to do otherwise.

Lastly, the article suggests getting debt consolidated as much as possible, and switching to cash as the primary method of payment. A consolidated debt makes a singular target easier to whittle down, while using cash takes credit card use out of the equation.

There are all kinds of good tips to consider when trying to address a difficult financial situation. However, for those in the most dire of situations, filing for Chapter 7 bankruptcy can be right when all other options don't pan out.

Source:, "Rossi: Managing your own personal debt ceiling," Kurt Rossi, Feb. 3, 2013

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