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Avoiding Chapter 7 bankruptcy through "snowball" method

Americans have a debt problem; this much is clear thanks to a study by the Federal Reserve Bank that suggests collective household debt in the United States reached some $13.86 trillion in 2019. Here in Kentucky and elsewhere in the nation, households struggle to pay credit cards, medical bills, student loans, car payments and many other types of debt. However, financial experts offer a variety of options to struggling households, from debt reduction plans through to Chapter 7 bankruptcy. 

One such plan is colloquially known as the "snowball method" of debt reduction. The idea behind this method is first to sort all outstanding debt from smallest to largest balance. Mortgages are considered "good" debt and can be left out of this equation. From there, the snowball method requires that a household pays minimum payments on all but the debt with the smallest balance. 

All available resources are dumped into paying down the smallest balance first and in full, as soon as possible. Then, the household can move to the next-smallest debt, and so on. The idea is to build momentum, much like a snowball rolling down a hill, allowing larger and larger debts to be tackled. This method is best suited to those with so-called "typical" debt problems: paying off small balances with higher interest before moving onto larger balances with lower interest. 

While many methods of debt reduction exist to help the people of Kentucky handle their portion of the American consumer debt load, some families are beyond what the snowball method and others like it can do. In these cases, it may be financially wise to consider Chapter 7 bankruptcy as an option. With the support of an experienced attorney, Chapter 7 can be used to wipe out certain existing debts and pay down others in a relatively short period of time. 

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Law Office of Ginger C. Cord, PSC
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