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Top New Year’s resolutions for getting out of debt

With the recession in Pennsylvania lifting, many people are under the impression that getting out debt will now be simple and easy. Unfortunately, for many Americans, this may not be the case. Time magazine recently reported that, while borrowing on credit cards has dropped since 2008 and is nowhere near its peak, it is still very high. In fact, gradual financial recovery seems to have slowly increased national numbers of debt, with the total amount owed to credit card companies sitting at $935.6 billion nationally.

 

For the 65 percent of card users who carry a balance each month, the high rates of interest may push getting out of debt at the top of their list of New Year’s resolutions. If this is the case, one of the first steps toward financial freedom is calculating interest rates and pay-off amounts. The average interest rate and balance are 15 percent and $4,717 respectively. It would take 10 years to pay off that amount at the minimum payment of $189, and the total amount paid would equal $22,869. Credit card debt holders need to look closely at their balances and interest rates to determine how long their pay-off time will be.

 

For most people, the next step is to determine ways to pay off debt faster. While there may be some cases in which tighter budgeting can help, many Americans fall into a group of people who are already financially-strapped to the point that there is no way they will be able to break free. For those with no achievable options for getting out of debt, Bankrate.com advises that they consider declaring bankruptcy.

 

Filing for Chapter 7 bankruptcy can allow people to eliminate unpayable debt and gain a fresh start. Another advantage is that some current assets, like a vehicle or 401(k) account, can be retained even if bankruptcy status is given. This way, a fresh start does not have to mean starting completely from scratch.

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