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Table of Contents

Personal Finance 03

Credit Cards 12

Debit Cards 19

Lines of Credit 25

Debt Relief 29

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Personal Finance

There are many factors that affect your personal finances, such as how you utilize and pay off your credit cards and personal loans. Moreover, there are certain influencing factors that determine your likelihood to be approved for a new line of credit, as well as the amount of interest that you will be expected to pay over the course of a loan. Your credit score and credit history are among the most important elements that lenders review when determining whether or not to approve a loan and its interest rate. That is because your credit standing indicates the overall likelihood that you will repay your loan. Thus, it is important to learn how to improve a low credit score, build credit for the first time, identify weaknesses on your credit report and understand the lasting effects that credit may have on your finances. Credit Scores

Your credit score is a three-digit number that reflects your financial history, including your credit history, your credit utilization and whether or not you have

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made payments on time. Your overall credit score and history help lenders determine whether or not you will be able and willing to repay a loan, as well as the level of financial risk that you represent to the lender. There are three major credit bureaus in the U.S.: Equifax, Experian and TransUnion. These bureaus routinely receive reports from lenders that you have accounts with, such as credit card issuers, auto financers, home mortgage providers and financial institutions that approve personal loans. Your total balance, credit utilization, payment history and other factors are reported to these credit bureaus in order to determine your credit score. Consequently, your credit score is likely to fluctuate over time and change on a regular basis based on payments made. Overall, credit scores are calculated using the following factors:

Your payment history

The amount of debt that you have in relation to your credit limits

The age of your credit history

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Recent applications for new credit lines

Whether or not you have more than one type of credit

Your credit score will fall into a “range” based upon how you compare to others. These ranges are:

Bad Credit: 300-629

Fair Credit: 630-689

Good Credit: 690-719

Excellent Credit: 720-850

Credit Reports

You must check your credit report on a regular basis in order to constantly check for potential mistakes. Moreover, checking your credit report regularly can help you catch the early warning signs of identity theft, such as a number of incorrect information or new credit accounts that you did not apply for. Generally, you are able to review your credit report in a number of ways, such as through financial institutions and credit reporting agencies, or by requesting a credit report from one of the three major credit bureaus. In addition, credible websites such as

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CreditKarma.com and NerdWallet.com also offer free credit reports. When reviewing your credit report, you will find information about you and your personal finances, including:

Personal information, including your name (as well as any changes to it), address, phone number, date of birth and employment history.

Accounts that have not gone to collections and have not been defaulted on. These accounts will list the name and address of their creditors, as well as the type of account, credit limits or original amount of an installment loan.

Negative information (if any), such as accounts that have gone to collections and public records. Common examples include bankruptcies and public court judgments.

Inquiries on your credit that appear for a period of time whenever you apply for a new line of credit, as well as credit limit increases.

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As a rule of thumb, most of the information on your credit report will remain on your report for seven years. However, certain information, such as bankruptcies, will remain on your credit report for up to ten years. Negative information, such as an account that goes to collection, can potentially damage your credit score for the total length of time that it remains on your account. Understanding Credit Utilization Rates

Credit utilization percentages can have a significant impact on your credit score and your debt-to-income ratio. Overall, credit utilization is a measurement of how much you owe on all of your revolving accounts in comparison to your total available credit. Having a low credit utilization can improve your credit score, whereas having a high credit utilization can damage it and paint you as a “high-risk” borrower to lenders. You can find your current credit utilization ratio by taking the total balances on all of your accounts, dividing that number by the total credit limit on all of your accounts and multiplying the result by 100, thus expressing the result as a percentage.

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Experts suggest that you should not use more than 30 percent of your overall credit limit on any one account. That way, your credit utilization on your credit report should not reflect an amount above 30 percent. Understanding Your Length of Credit History

The longer you have had an open credit account that, the better your credit score will likely be. The difference between having a line of credit for six months or six years can be significant, and can determine up to 15 percent of your credit score. Once an account is no longer active, it can no longer be used to determine your length of credit history. For example, if your longest line of credit is for an auto financing account, but you pay off your loan, that account will close, thus resulting in a potential reduction to your credit score if you do not have another credit account with a comparable history. The Impact of Low and High Credit Scores

Your credit score can affect your financial standing in a number of ways. From a financial standpoint, your credit score is a deciding factor in whether or not you will be approved for a loan, including mortgages,

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auto financing or credit cards. Your credit score will also determine your interest rate, which will affect the overall amount that you can expect to pay over the term of the loan. Not only can your credit score affect whether or not you are approved for a new line of credit and a better interest rate, but having a low score can also reduce your likelihood to be approved for a home or employment. Potential landlords and employers may ask for your permission to check your credit. Credit scores have become so important in the U.S. that credit checks have become very regular. Your score will likely determine whether or not you must have to pay a security deposit when activating a utility and even whether or not a cellphone carrier will be willing to offer you services. Tips for Building Credit from Scratch

If you have not had a credit account, you may not have a high credit score due to the lack of credit history and payment activity. This can present you as a high-risk borrower to potential lenders. As such, building credit for the first time can be a challenge. For starters, you can apply for a secured credit card. This is a type of credit card that is backed by a cash

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deposit that is made up front. Generally, the credit limit for this type of credit card will equal the amount of your deposit. Similar to a secured credit card, you may also apply for a secured loan by providing a financial institution with collateral for the account. Collateral may be monetary or something else of value to the institution. In certain cases, you may not be able to get a loan or an unsecured credit card. However, if you are able to get a co-signer for the loan, your odds for approval may increase significantly. Having a co-signer reduces your risk to lenders if the co-signer becomes equally responsible for the loan and will likely be on the hook should you be unable to pay for the loan. If you have a friend or family member that already has a credit card or another line of credit, that individual can add you onto their account as an “authorized user.” As an authorized user, you will not be on the hook as a co-signer would be, and you do not need to pass a credit check. However, you can still benefit from having access to the credit card or account and can build your credit history from the account, even though the account is in someone else’s name.

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Rebuilding and Improving Your Credit

As stated in previous sections, it can take seven to ten years for negative information to be removed from your credit report. However, that does not mean that you cannot start rebuilding your credit already. When rebuilding credit, it is important to review all of your open accounts that may be damaging your score. Experts recommend paying down any open accounts that have not yet gone to collection and work towards reducing balances to at least 30 percent or lower. Moreover, strive toward making payments on time every time, as these efforts can help you to significantly improve your score. Review all of the information on your credit report and dispute any details that are incorrect. Correcting a large mistake on your report could potentially add points to your overall score quickly. If you do not have any open accounts, you may need to obtain a secured credit card or a secured loan to get started on building a positive credit history and offset the existing negative marks on your report. Having a co-signer or becoming an authorized user on someone else’s account can be just as beneficial

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to those interested in rebuilding credit, as well as those interested in building credit for the first time.

Credit Cards

Credit cards are used to make purchases or pay for services that accept credit card payments. Generally, these cards are linked to lines of credit that are lent to you from credit card issuers. Therefore, when making a purchase with a credit card, you are essentially borrowing money from a lender.

When you are approved for a credit card, you will be issued a specific credit limit, which is the maximum amount of funds that you can utilize. However, utilizing a large percentage of your credit limit can impact your credit score negatively.

Customers generally pay their credit card bills on a monthly basis. Every time a payment is due, you have the option of paying a specific minimum amount, paying the balance in full or paying an amount in between.

Paying the minimum required amount is often the most expensive option, as you will pay more in interest rates over time. Therefore, if you are able to pay your statement in full every month, it is recommended that you do so.

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Payments must always be submitted in a timely manner. Experts suggest that your payment history could account for up to 35 percent of your credit score. Additionally, making payments on time can help you avoid additional fees, such as late fees.

If you are considering applying for a credit card, it is important to familiarize yourself with common credit card fees, as well as the various types of credit cards available. By doing so, you will be better prepared and know the type of credit card that works for you. Common Credit Card Fees

If you intend on applying for a new credit card, it is important to learn about the common fees that you may come across. However, be mindful that not all credit cards will include every type of potential fee. Annual fees are fees that are charged every year in order to maintain the credit card account open. These fees generally coincide with the anniversary of the date that you first opened the credit card account in question. This type of fee is most commonly charged on rewards credit cards and secured credit cards. Balance transfer fees are associated with balance transfer cards. Generally, this fee is between three and four percent of the balance being transferred. However, there are cards that offer zero percent fees.

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Cash advance fees occur when using your credit card to obtain cash from an ATM or bank. This fee can vary between credit cards that offer this feature, but is typically between two and five percent of the amount of cash taken. A finance charge is a common charge that can be found on almost every type of credit card. It is a charge based on the interest that you owe on your credit card balance. Moreover, it is included in your monthly statement. You may avoid this charge altogether by paying off your balances in full each month before their due date. You may encounter a foreign transaction fee should you attempt to use your credit card for purchases outside of the United States. Fees range between three and four percent on average. However, there are various credit cards that do not charge this fee. Late fees are accrued when you submit a payment past the due date shown on your statement. The amount of the late fee will vary between cards. While all credit cards have late fees, you can avoid paying them by making payments on time. Similarly, a returned payment fee will occur if you submit a payment for your credit card but the

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payment is returned due to insufficient funds in your payment account. Generally, this fee is around $35.

Low-Interest Cards

Low-interest credit cards can help you save more money in comparison to cards with higher interest. If you are expected to pay less interest on your purchases, you will pay less over the term of your loan and be able to pay off your debt faster.

A low-interest credit card provides the most benefits to those who carry a balance during most months rather than those who are always able to pay off their balance in full.

Credit cards with low interest are typically only available to applicants who have higher credit scores and positive credit history. In general, the lower your credit score is, the higher the interest rates associated with that credit card account will be.

If applying for a low-interest credit card, look for one that offers a zero percent introductory annual percentage rate (APR) period, preferably lasting a year or longer. Balance Transfer Cards

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If used correctly, balance transfer cards can be an incredible tool for debt reduction and can help you to avoid high-interest fees. A balance transfer card offers a low-interest rate, preferably zero percent, for a set period of time.

Typically, these cards will raise interest rates after the pre-determined period of time has ended. Certain balance transfer cards may also charge a fee based on the amount of debt transferred onto the balance transfer card.

A balance transfer card is a useful tool if you would like to pay off a debt that is on another credit card or on a loan that has a higher interest rate. Having a higher interest rate can result in large finance charges each month, therefore increasing the amount you will be expected to pay over the course of a loan.

The amount of debt that you can transfer onto your balance transfer card will depend on the credit limit that you have been granted. Generally, it can take up to three weeks for a transfer to be completed. Thus, you must continue to make payments on your old account until the transfer has been completed.

If interested in a balance transfer card, it is important to review offers that you may have in order to find the balance transfer card that is right for you. Not only are you looking for a card that has a low or zero

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percent interest rate for a lengthy period of time, but it is worth taking the time to find a card that has a low balance transfer fee.

Furthermore, it is preferable to obtain, a card that does not carry an annual fee. Ideally, you will want to pay off your entire balance within the low-interest rate period. Student Cards

Student credit cards are designed for young adults who are between 18 and 21 years of age and have limited or inexistent credit history but would like to begin building toward credit. These cards can have lower requirements in comparison to traditional credit cards.

However, this type of credit card generally includes a high interest rate and may also include annual fees. These cards may also include low credit limits, such as between $300 and $500.

When selecting a student credit card, it is important to keep in mind that you can avoid high-interest payments by paying your credit card statement in full every month.

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Student credit cards are not the only options available to young adults who have little or no credit history. For instance, a secured credit card can generally be obtained with the appropriate down payment for the card.

In any case, student credit cards generally do not include annual fees or foreign transaction fees. Credit Card Rewards

When used responsibly, reward credit cards can offer numerous benefits when used for regular purchases. Depending on the type of rewards card that you opt for, you may receive rewards in the form of cash back or points that can be converted into discounted or free airline tickets or hotel stays.

Reward credit cards are typically suitable for individuals who have good or excellent credit scores and do not intend on carrying a balance from month to month. These types of credit cards typically have high APRs. Thus, if carry a balance on a rewards credit card, the monthly interest rate payments that you will have to make will generally cancel out any type of reward that you may have earned.

When selecting a rewards credit card to apply for, it is important to look for rewards offers of at least two

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percent. Generally, the higher the percentage is, the more rewards you will accrue.

A number of rewards cards will also provide higher rewards for specific types of purchases, such as payments made at gas stations or supermarkets. Certain types of reward cards may also change the purchase categories that offer the highest rewards on a quarterly basis. Secured Credit Cards

A secured credit card is backed by a cash deposit that you make up front. Generally, the credit limit that you are offered for this type of credit card equals the amount of your deposit.

This type of card is particularly useful to individuals who are building credit for the first time or attempting to rebuild credit and recover from having a bad score.

Debit Cards

Unlike credit cards, debit cards are tied to bank accounts, such as checking accounts. Debit cards also come as pre-paid cards in which you must transfer money onto the card before you can use it for a purchase.

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Checking Accounts

Having a checking account makes it easier to make purchases. Checking accounts are provided by various financial institutions. In most cases, a debit card is provided with the account, which may be used for purchases or for withdrawing cash from an automated teller machine (ATM).

The money that is available in your checking account is determined by the amount of money that has been deposited in it. If you do not have direct deposit set up, you can cash paper checks at your bank to deposit money into your account.

Most banks now provide access to online banking services that allow you to better manage your finances, view your balance and electronically transfer funds to a savings account, if you have one. Several banks also provide online banking features such as automatic bill payments and mobile notifications for all purchases.

On the other hand, there are disadvantages to checking accounts. For instance, several banks

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charge monthly fees in order to maintain these accounts.

However, certain banks waive this fee if you set up direct deposit or use your debit card a certain number of times per month. You may also experience other types of fees, such as withdrawal fees when you use third-party ATMs.

Furthermore, certain banks may require you to keep a minimum balance in your checking account in order to keep the account active. Alternatively, certain financial institutions may charge debit card usage fees after a set number of transactions. Savings Accounts

Savings accounts are similar to checking accounts as they are offered by banks and other financial institutions. However, savings accounts do not generally include a debit card, and you may be penalized for withdrawing funds on a regular basis. On the other hand, these accounts offer several advantages that can help you save money, such as higher interest rates to help you accrue additional funds over time.

For some, having a savings account does not make it any easier to save money, as it may be tempting to

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spend what you have with the quick and easy access to those funds. This particularly true with so many online features that most savings accounts offer. Similar to checking accounts, savings accounts often include a minimum balance requirement in order to waive monthly maintenance fees. Direct Deposit

Depending on your employer, receiving payments via direct deposit to your bank account may be an option to you. Direct deposit is an electronic payment method that transfers funds from one bank account to another. Having direct deposit can eliminate the cost of printing paper checks (which reduces the waste of paper) and provide employees with payments sooner in comparison to physical checks.

If you set up direct deposit with your employer, you will receive your paycheck directly to your checking or savings account. Balances automatically increase when a payment arrives, allowing you to avoid unnecessary trips to your bank and any wait that your bank may require before your funds become available.

Direct deposits are not used to receive paychecks, but various government programs, such as those administered by the Social Security Administration

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(SSA), often require the use of direct deposit for the transferring of monetary benefits as well. In certain states, direct deposit is even used to receive benefits such as the unemployment insurance funds.

If you would like to set up direct deposit payments, you will need the following information:

Your bank account number

Your bank’s routing number

The type of account that would like deposits to be made to (checking or savings)

Your bank’s name and address

The name(s) of the account holders listed on your account

Most of this required information can be found on the front of a personal check. You can also contact your bank and ask for your direct deposit information.

When setting up direct deposit, you may also be required to provide a voided check. Moreover, certain employers may ask you to complete a form.

After setting up direct deposit, it may take a few weeks for your payments to start being deposited into your account automatically. During this period, you will likely still receive paper checks from your

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employer or participating monetary benefit program. Pre-Paid Cards

Pre-paid cards have become popular in recent years. In general, these cards offer an alternative to secured cards and do not require credit checks along the way. Pre-paid cards allow you to transfer money onto the card, at times for a fee. The money transferred onto the card can then be used for purchases of all kinds.

On the other hand, pre-paid cards have various drawbacks, such as the fees incurred by these cards. Depending on the type of pre-paid card you acquire, you will likely run into numerous fees, including fees to activate the card, deposit money, withdraw cash or even check your balance.

Various pre-paid cards also include a monthly maintenance fee that must be paid as long as the card remains active. If you are interested in a pre-paid card, it is important to review all of its potential fees carefully and find a card that has as few fees as possible.

Prepaid cards can be purchased from a number of retailers, including superstores, grocery stores and participating gas stations.

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Lines of Credit

In addition to credit cards, you may have the option of acquiring a different type of line of credit, such as a personal loan. Lines of credit may be provided in a lump sum immediately or as set amounts of money that are withdrawn as needed. It all depends on the type of credit and the agreement terms between you and the lender in question. Personal Loans

While most personal loans are unsecured and include fixed payment amounts, there various other types of personal loans, including secured loans and variable-rate loans.

Personal loans are generally provided in one lump sum and must be repaid during a pre-determined period of time, typically between one and seven years. They may be fixed or be on a variable interest rate. A fixed interest rate will not change over the course of the loan, but a variable interest rate can.

An unsecured loan is not backed by any type of collateral. Thus, unsecured loans are generally seen

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as a higher risk to lenders, which generally result in higher interest rates ranging from 5 to 36 percent.

However, these rates vary depending on a number of factors, such as your credit score, credit history and debt-to-income ratio. These factors will also affect your likelihood of being approved for the amount you are asking for or being approved altogether.

A secured personal loan is similar to an unsecured loan, except that it is backed by some form of collateral, such as a vehicle or home. The most common form of secured personal loans are mortgages and car loans. However, certain banks and lenders will offer a personal line of credit that you can borrow against your car, home or another valuable asset.

Interest rates are generally lower for secured loans, as they are considered less risky to lenders. Should you fail to repay a secured personal loan, the lender can take ownership of the collateral used to obtain the loan.

You can apply for a secured or unsecured personal loan through most financial institutions. However, the

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minimum requirements for these loans vary between lenders.

Generally, payments must be made toward the loan amount on a monthly basis. These payments will go toward the principal balance of your loan as well as its accrued interest.

Your repayment options will vary depending on each particular lender. While lenders allow you to pay in a number of ways, including at a branch office, over the phone, by mail or online, other lenders may restrict payment options to one or two available methods. Payday Loans

Payday loans are generally only used as a last resort when you need cash quickly and do not have any other option. This type of short-term loan is typically due in full on the applicant’s next payday. In some cases, payday loans may be repaid in payments over the course of a few months.

Overall, payday loans have some of the highest interest rates on the market. It is not unusual to see interest rates as high as 390 percent or higher.

In 2019, new regulations were put into place that require lenders to pre-determine whether or not an

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applicant can repay the amount borrowed in a timely manner. These new regulations also restrict lenders from attempting to withdraw funds from a borrower’s bank account after two attempts have already failed.

While new government regulations provide some protection to borrowers, experts strongly recommend caution when it comes to payday loans. Borrowers may be able to use an alternative to a payday loan, such as a small personal loan from a credit union or small financial institution.

Otherwise, borrowers may simply apply for a credit card. If you decide to apply for a payday loan, you are encouraged to review all of the loan’s terms.

In order to apply for a payday loan, you will be required to have an active bank account, a valid photo ID and proof of your income, such as a pay stub. You must also be at least 18 years of age. Low-Interest Loans

Like all types of loans, the lower the interest rate on the loan is, the less you will be expected to pay over the course of that loan. However, in order to obtain a low-interest rate loan, you must typically have a good or excellent credit score, as well as a debt-to-income ratio that

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meets a lender’s criteria for the amount that it is lending.

You can apply for a low-interest rate loan through most banks and financial institutions. You may also apply online with various lenders.

Debt Relief

As more Americans have begun to struggle with debt, additional avenues to relieve such debt have begun to emerge. Debt relief can be achieved in various ways, including debt consolidation, settlements and debt management plans.

Credit counseling can also be a valuable tool for anyone who wishes to reduce and ultimately eliminate the amount of debt that they owe. Generally, counselors offer personalized, step-by-step plans and assistance with budgeting.

By gathering more information about the various methods of achieving debt relief, you will be better prepared to make an informed decision. If facing a potential bankruptcy, you will be given the

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opportunity to learn the pros and cons of declaring bankruptcy, as well as the alternatives that may be available to you.

Debt Consolidation

With debt consolidation, you can combine the high-interest debt into a singular, lower interest payment. In turn, this will allow you to reduce the amount that you will likely pay in interest as you work toward paying off the debt you owe and eliminate your debt more quickly. Debt consolidation may be an ideal choice if:

Your total debt, excluding your mortgage, does not exceed 40 percent of your gross income.

Your credit score and debt-to-income ratio allow you to qualify for a zero percent credit card or a low-interest debt consolidation loan.

You have a plan to prevent accumulating a significant amount of debt again in the future.

Debt consolidation can be done through the use of a credit card or personal loan, which provides you with

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additional options. Regardless of whether you apply for personal loans or credit cards, you must meet certain criteria, such as credit score requirements.

Debt consolidation is not for everyone. If you have excessive spending habits or are overwhelmed by debt, debt consolidation may not be the right option for you. Fortunately, there are other debt relief options that may be better suited for your circumstances.

Debt Settlement

Debt settlement allows you to pay down old debts for less than the total amounts that you owe, as long as a creditor or collection agency agrees to accept the lesser amount in a lump sum payment. Debt settlement will also require you to have the money up front to settle a debt altogether, which can be less appealing to borrowers who are overwhelmed by their debts or those that have little or no income.

On the other hand, creditors do not generally offer debt settlement opportunities unless the creditor or collection agency has reason to believe that you are unable to pay the full amount you owe. Settlement options are generally only offered if you have not made payments for a long period of time, or if you

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have stopped making payments altogether. Thus, debt settlement is not generally an option for active accounts that have a fair payment history.

If you are interested in settling debts with a creditor or collection agency, you can either attempt to negotiate with the creditor on your own or go through a debt settlement company that will negotiate on your behalf. However, these companies cannot negotiate for certain types of debt, such as student loans.

Furthermore, debt settlement options are not offered for secured loans such as mortgages or auto financing. That is because your home can be foreclosed upon and your vehicle can be repossessed should you be unable to pay your debt.

While settling a debt with a creditor can offer the benefit of ridding yourself of debt altogether, often for a reduced cost, it is not without its drawbacks.

Should you choose to settle your debt for less than the amount you owed, your credit will likely take a hit. The account will show as a debt that is charged by lenders, which will remain on your credit report for up to seven years.

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In addition, you will likely be required to pay additional fees on top of the amount you settle for, such as taxes owed on the forgiven debt. Should you choose to work with a debt settlement company, you will also have to pay that company’s fees, which are generally a percentage of the total amount of your debt or a percentage of the forgiven amount.

Credit Counseling

If you want to begin working toward debt relief, or if you have not been able to make much headway on your own, you may benefit from seeking credit counseling. Depending on where you live, you may be able to find a non-profit credit counseling agency that offers services for free. Otherwise, you may be charged a small fee for these counseling services.

Credit counseling can not only assist with general budgeting strategies, but also with the development of debt management plans and the providing of resources for student loans and housing debt. If you are considering filing for bankruptcy, a credit counselor will be able to provide you with additional information about the process, such as the lasting impact that accompanies a declaration of bankruptcy and all the alternatives that may be available to you.

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When seeking out a credit counseling agency near you, make sure to look for agencies that are accredited and certified in your state. If the agency is a nonprofit organization, make sure that it is part of either the National Foundation for Credit Counseling or the Financial Counseling Association of America.

It is important to consider the cost of each credit counseling agency, as well as the services that they provide. Overall, the costs and available services can vary significantly depending on each agency.

Debt Management Plans

Commonly available through credit counseling agencies, debt management plans can assist you in paying off debt quickly while also helping you save money. A debt management plan can combine several debts into one monthly payment, making it easier to pay down your debt. Additionally, credit counseling agencies can often get creditors to reduce their interest rates, thus saving you money over time.

If you are considering a debt management plan, be mindful that these plans offer benefits such as:

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Debt management plans can often help you reduce your interest rates by half (or more).

These plans can help you pay off debt more quickly in comparison to going at it alone.

These plans will consolidate various different debts into one monthly payment.

Debt management plans are not for everyone. Like all debt relief options, debt management plans have certain drawbacks, which include:

Debt management plans are primarily used for credit card debt. Alternatively, they cannot be used for tax obligations, student loans, secured loans or medical expenses.

A debt management plan can take between three and five years to complete. While on a debt management plan, you will likely be unable to use credit cards or apply for new lines of credit.

Missing a payment can derail your debt management plan and cancel out any decreases to your interest rates.

Bankruptcy

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Filing for bankruptcy should always be considered as a last resort, as it is a timely process that will harm your credit score and history drastically for up to ten years. Rebuilding your credit following bankruptcy can be very difficult, and there are a number of lenders who will refuse to approve you for a loan based on the fact that you have filed for bankruptcy in the past.

On the other hand, bankruptcy is still a viable option for those who are overwhelmed by debt and may not benefit from an alternative. Filing for Chapter 7 or Chapter 13 bankruptcy may be the right choice if:

You do not have many assets.

Your total debt equals more than 40 percent of your annual income.

Your debts can be discharged or forgiven under Chapter 7 or Chapter 13 bankruptcy.

It would take you five or more years to pay off your debt, even under extreme measures.

It is important to note that filing for bankruptcy may not eliminate all of your debt. Certain debts cannot be discharged or forgiven through bankruptcy,

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including child support, student loans and owed taxes.

In order to file for bankruptcy, you must meet certain eligibility requirements. For starters, you must meet a “means test,” which reviews your income, assets and expenses in order to determine whether or not you are able to repay your debts. You will also not qualify to file for bankruptcy if you have filed for Chapter 7 in the past eight years or Chapter 13 in the past six years.

If you meet the requirements and wish to file for bankruptcy, you will need to decide whether you will file for Chapter 7 or Chapter 13. Chapter 7 bankruptcy would eliminate all eligible debt, while Chapter 13 will allow you to choose certain debts to continue to pay off while eliminating others.

In order to file for bankruptcy, you must complete a number of steps, which include:

1. You must complete a bankruptcy counseling form from a qualified nonprofit credit counseling agency within 180 days before filing for bankruptcy.

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2. You are strongly encouraged to hire an attorney that specializes in bankruptcy cases, as there are numerous forms that must be completed and filed. Your case can be dismissed if you do not have the proper paperwork or if anything is considered incomplete.

3. File the necessary paperwork with your attorney. You will need to gather all relevant documents related to your debts, income and assets.

4. Once your bankruptcy petition has been filed, a court-appointed trustee will take over your case.

5. You will need to meet with your creditors. While a trustee will arrange these meetings, you must attend the meetings with the creditors. You are strongly encouraged to have your lawyer present.

6. Your court-appointed trustee will determine whether or not you are eligible for bankruptcy.

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7. If found eligible, your court-appointed trustee will determine whether or not the assets you own are worth selling. If sold, the funds gathered from your assets will go to your creditors.

8. You may be required to attend an educational course before your bankruptcy case can be completed. This course is often provided through a qualified nonprofit credit counseling agency.

It can take between three and six months after you file your petition for your debt to be discharged. Once this happens, your eligible debts will be forgiven.

Tips for Paying Off Debt

With the right motivation, strategies and a plan in place, you can reduce and ultimately eliminate your debt. Experts recommend the following tips to help you find debt relief:

1. Make the most of your income. Whenever possible, pay only essential expenses and cut back on costs that may be dispensable. Try to allocate as much of

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your income as possible to pay down your debts. Once you have a budget and a plan, track your progress. Then, revise your budget as needed.

2. Work on overspending habits. If your debt is a result of overspending, make sure to work on those habits. Create spending guidelines and stick with them to avoid overspending.

3. Make extra payments whenever possible. Making extra payments on your debts can help you pay them down more quickly. Moreover, it can help you reduce your credit utilization ratio, which will consequently improve your credit score while you work towards eliminating the accumulated debt.

4. Consider consolidation and other debt relief options. Depending on your circumstances, you may benefit from debt consolidation or a balance transfer credit card, as long as you have a decent credit score and meet the income requirements.

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