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Consolidating debt

Florida consumers who are struggling with their financial obligations have several options. Debt consolidation may help pay off high-interest loans such as credit cards, but there are several factors that must also be in place for this strategy to be successful.

A realistic budget is necessary. There are two common errors that people make when putting one together. One is failing to account for infrequent expenses such as holiday gift and entertainment spending. Another is failing to budget for indulgences which can lead people to spend too much because they feel deprived. Not using the credit card is important for paying off debt. People may use techniques like freezing the credit card or cutting it up. These are better than canceling the card because that can damage credit. People should not hesitate to seek support from others as they work on paying down debt.

There are several debt consolidation options possible. With a balance transfer credit card, people may be able to shift all balances onto one card and not pay interest for a certain period of time. Personal loans may be another possibility since these usually have lower interest rates. If debt consolidation still leaves a person struggling financially, it might be time to declare bankruptcy.

Some people may hesitate to file for bankruptcy because of misconceptions. For example, they may think that they will lose all their assets. However, some assets can be declared exempt in a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, a person can keep assets and work out a payment plan to repay creditors over three or five years. People may also think that bankruptcy will ruin their credit, but falling behind on payments hurts credit scores as well.

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