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Understand credit card debt before filing for Chapter 7

Some 43 million Americans carry a balance on their credit cards, estimated to make up about 22 percent of all credit card users in the country. Kentucky residents who count themselves in that number could be laboring under the false notion that carrying a balance can help improve a credit score. Unfortunately, this is nothing more than an enduring myth, and could land consumers in serious debt. Options like Chapter 7 bankruptcy can help to eliminate that debt, when financial circumstances warrant that relief.

The major drawback of carrying a credit card balance is interest. Most Americans carry a balance in the mid-$6,000 range. With an average national APR of above 16 percent, this can translate into hefty interest payments that can limit a card holder's ability to pay down the debt. Contrary to the myth, the higher amount of debt an individual carries on a credit card compared to their total limit, the poorer that person's credit score becomes.

Payment history is also a potential problem. Many Americans are not stringent in paying their credit balance on time, with over 40 percent admitting to paying late. According to some studies, many people cited their reason as having simply forgotten. This can be remedied by setting up automatic payments for at least part of the balance, but ultimately, paying credit in full and on time each month is the best way to improve a credit score.

Of course, for some Kentucky residents, this is not feasible. For those individuals, other options exist, from debt consolidation to Chapter 7 bankruptcy. Credit card debt is considered unsecured, which means in some circumstances a bankruptcy court could elect to discharge outstanding credit card debt, relieving the pressure of debt and allowing an individual to get back on the right financial track.

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