Three steps to deal with your debt problems in the New Year

With the holiday season behind us, many are struggling to recover from the financial hangover that is common this time of year. If you are struggling with debts this time of year, there are several options for getting yourself back on financial track.

If your debts are more than you can hope to pay off within a reasonable time, filing bankruptcy may be the best option for you. However, if steps are taken early enough, many people with smaller debt loads can avoid bankruptcy by taking certain measures. Specifically, financial experts offer the following tips:

Paying with cash: This may seem like a no-brainer, but it is impossible to stop your debt problems if you keep racking up debts. To avoid this scenario, and the high interest rates that credit cards charge, experts recommend setting a budget and paying for all of your expenses in cash or check. If having cash around tempts you to spend, use a debit card to pay instead. Whenever possible, pay for all expenses in full. If you need to make a larger purchase, make sure that you set aside enough of your income to allow you to pay for it without resorting to credit cards or other financing methods.

Use a strategy to pay off your debts: Once you have stopped accruing more debt, it is time to formulate a plan to repay your outstanding debts. Your top priority should be paying off high-interest credit card debts, as they are likely the biggest dangers to you financially. Do not be satisfied with making only the minimum payment on these cards, as that will not significantly lower the principal. Instead, make as large of payment as you can afford towards your credit card debt each month.

Mind your credit score: Your credit score has likely taken a beating if you are in debt. Because lower credit scores result in you being charged higher interest rates, it can make carrying debt on credit cards more expensive than it needs to be. Fortunately, if you pay down your debts each month and pay your regular expenses in full, your credit score will increase over time. After a while, it may be beneficial to transfer your credit card debt to other cards with lower interest rates, so you can avoid paying unnecessary interest.

Consult an attorney if in debt

Although these tips can help some stay away from financial disaster, they will likely not be enough if you have a large debt load or have lost your job. In such cases, filing bankruptcy is likely the best choice, as it will discharge your credit card, medical bills and other unsecured debts, allowing you to start again with a clean financial slate. To learn about whether bankruptcy is the logical next move, speak with an experienced bankruptcy attorney.