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Helping good people through bad times

Bankruptcy can help wipe away massive credit card debt

Finding financial stability these days can be an enormous challenge. With unemployment still falling slowly and the economy struggling to recover from the Great Recession, many Americans, including those in Tennessee, have come to rely on their credit cards to make ends meet. In addition, credit cards cover unexpected expenses that result from events, such as emergencies.

Recently, the TransUnion credit-rating agency stated that the average cardholder in the United States owed almost exactly $5,000 in credit card debt. The agency has predicted that this figure will dramatically increase in the coming years.

Continuing to use credit cards to cover daily expenses, however, often leads to financial disaster. Credit scores drop and credit card debt increases when cardholders fail to make payments on time, make the lowest payment possible or are living paycheck to paycheck from salaries, wages, unemployment or other benefits.

Fortunately, there are several ways to get rid of credit card debt. Credit counseling, debt consolidation, debt settlement and filing for personal bankruptcy are options a person may want to consider when facing credit card debt.

Credit counseling can help cardholders by reducing payments and interest fees. Sometimes, credit counselors can also reduce the actual amount owed. Debt settlement is an agreement between a creditor and debtor in which the latter pays a percentage of the debt owed plus taxes, and debt consolidation can be done by the debtor by acquiring a large loan to pay off smaller debts. Although, this only makes sense only if the bigger loan has a lower interest rate than the other debts.

Sometimes, when all other options have been attempted with no avail, a person may choose to file bankruptcy. An individual is most likely to qualify for Chapter 7, where assets are liquidated to pay off debts, or Chapter 13, where a person commits to a payment plan for up to five years, to pay off the debt.

A bankruptcy can eliminate not only credit card debt, but also other unsecured debts, such as those from medical expenses and payday loans. Through Chapter 7 or 13, an individual really can start over.

Source: The Rock River Times, "Five debt solutions for consumers struggling with credit card payments," May 8, 2014

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-624-4002
Toll Free: 800-257-7594
Fax: 423-624-0509
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