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Options for tackling overwhelming credit card debt

American consumer debt rate has once again returned to pre-2008 levels and many find themselves once again encumbered by record-setting credit card debt. The first step in figuring out how to tackle it involves you sitting down will your bills, making note of your balances, the minimum payments and interest rates for them.

You'll next want to determine what your overall debt to income ratio is. To do so, you'll want to first add up all of your outstanding credit card balances. Next, you'll want to divide that amount by your net salary.

If you determine that your debts comprise less than 15 percent of your net income, then you may find that deciding to just slowly pay down your balances on your own is best. One particularly effective approach for doing so involves starting by paying the bills with the highest interest rates first, ultimately working your way backwards to those with much smaller ones.

Alternatively, if you find that the ratio is larger than 15 percent, then pursuing debt relief may be best for you. There are three common debt relief options to choose from.

The debt management planning option involves you meeting with a credit counselor to establish up to a five-year long, reduced interest rate repayment plan.

Debt consolidation allows for you to bundle your bills. While this can reduce your interest rate, it requires you having to take out a personal loan or to consolidate bills with a balance transfer credit card.

Finally, debt settlement involves funds being placed in an escrow account. At the creditors discretion, they can take these funds and use it to satisfy an entire outstanding debt.

The main problem with this latter option is that it can significantly ruin your credit. It's because of this that individuals often choose bankruptcy as a way of dealing with their debt, especially if it comprises at least 50 percent of their annual income.

Bankruptcy can provide you with a clear path to erase your debts. However, a record of your filing will stay on your credit report for as long as 10 years after its been approved.

If you're drowning in debt and you're unsure as to what it's going to take to put an end to the collection calls, then a Toms River, New Jersey, bankruptcy attorney can advise you of options you can pursue.

Source: New Jersey Herald, "Different ways to zap your debt: Which is for you?" Sean Pyles, Sep. 14, 2017

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