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Handling debt, from consolidation to Chapter 7

According to recent studies, the average American consumer debt has now crested a record high of $13.2 trillion, which means the American adult carries an average of $40,000 in debt. This might sound daunting to Kentucky residents handling this level of debt, much of which can be attributed to credit cards, auto loans and other debts. Thankfully, many people have managed to overcome massive debt by making use of debt-reduction tools and practices, from debt consolidation all the way to Chapter 7 bankruptcy.

The first step in tackling debt is to come up with a comprehensive plan. This means checking one's credit score and determining where the debt is owed. Some people do not realize they are carrying mountains of debt until they take a close look at their finances. Building a budget that sets aside income to pay down this debt is a good practice at this stage in the game.

Focusing on credit card debt can also be helpful, since most American cards have massive interest rates, from 15 percent to over 20 percent. Some experts suggest devoting at least 20 percent of after-tax income to paying down this debt as quickly as possible. If multiple credit cards are in play, several methods can be used to pay off these cards over time. One method suggests paying down balances from smallest to largest, while another says it is best to pay down the highest balance first.

Of course, different methods will work better for different Kentucky residents when it comes to handling large debts. For those who are in over their head, Chapter 7 bankruptcy offers a way out as well. By liquidating assets and discharging unsecured debts like credit cards, a bankruptcy filing can clean the slate and allow the filer to regain his or her financial feet while moving toward a more stable economic future.

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