Getting your debt under control in 2013? Try these tips

With the New Year now upon us, many Minnesotans are working hard to make good on their resolutions to be better about managing their finances in 2013. For some, this may be as simple as sticking to a budget or spending less on clothing or dinners out. For others, though, the New Year has brought a renewed effort to get out from under the weight of serious debt.

If you are in this later camp, there are some things you need to know. The first is that even though you might feel alone, you are certainly not the first person to deal with this problem. Millions of Americans have faced similar situations and have fully recovered. In fact, according to the American Bankruptcy Institute, more than 1.3 million Americans filed for personal bankruptcy in 2011 alone.

The second thing you should know is that there are a number of strategies for dealing with debt problems. In some cases, filing for bankruptcy is the best option. However, sometimes people who catch their debt problems early enough can address them without having to file for bankruptcy. If you are working to get your debt under control, consider the following tips:

  • Pay with cash: This may seem obvious, but the first step to getting out of debt is to stop accruing it. Set a realistic weekly budget and stick to it. If you do not want to carry cash, then use a debit card. If you need to make a big purchase, set aside a few dollars each week until you have enough saved to pay in full.
  • Make a payment plan: Sticking to the minimum payments does not help anyone but the credit card companies - the lower your monthly payments, the more you will end up paying in interest in the long run. Instead, try to make your payments as large as you can reasonably afford. Even paying $10 or $20 per month beyond the minimum will make a significant dent in your principal.
  • Improve your credit score: If you have a lot of debt, chances are you have a few late or missed payments, exceeded your credit limit once or twice or have other black marks on your credit report. All of these things can damage your credit score, increasing interest rates and making your debt more expensive in the long run. By focusing on good credit habits, you can improve your credit score and, hopefully, cut your interest charges.

Filing for bankruptcy

If these strategies do not work - or if your debt burden is so large that you cannot realistically pay it back over a reasonable period of time - then filing for bankruptcy may be your best option.

Filing for bankruptcy has a lot of advantages. A successful bankruptcy can discharge nearly all of your outstanding debt (with a few notable exceptions, including student loans, child support and back taxes), allowing you to start over fresh.

If you are worried about your debt, it is a good idea to talk with a Minnesota bankruptcy attorney. The attorney will be able to evaluate your situation to help you determine what debt management solutions are best for you.