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What steps should you take to address debt and bankruptcy?

Many New York residents are facing a problem that millions of other Americans throughout the country are also facing: debt. Whether it is student loan debt, credit card debt, mortgage debt or some combination of multiple types of debt, this is a financial challenge that many people are trying to find a way to deal with. So, what steps should New York residents take to address debt and potentially bankruptcy?

First and foremost, most people who realize that they have a debt problem will probably try to make a plan to repay the debts. This is obviously a good first step, and part of this step should be taking an overall look at finances to see where money is coming in, where it is going out and assess the total amount of debt owed. From there, many people will be able to make a plan that allows for extra funds to be applied to debt that is owed.

Next, once the overall financial assessment of the situation is complete, those who are addressing debt problems will need to determine which debt to repay first - which one is the priority? There are various strategies for this step. Some will advocate for paying off the smallest debt first, which can give a debtor a sense of momentum toward repaying all debts owed. Others would say it is best to start paying down the debt with the highest interest rate first.

Unfortunately, some New York residents may find that their debt problems are just too significant to hope to be able to repay it all in full. For people in this type of situation, bankruptcy may be an option. Filing for bankruptcy can allow for some debts to be discharged, which can then free up funds to be applied toward debts that typically cannot be discharged, like student loan debt.

Source: FindLaw, "Repaying Debts," Accessed March 5, 2017

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