How much debt is too much?

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In today’s economy, carrying some debt is probably unavoidable. Some Americans may find themselves in over their heads when it comes to paying mortgages, car payments and credit cards. When they find that they are unable to dig out from under a growing debt burden that consumes more and more of their resources, many become frustrated and give up.

Doing nothing about your financial problems is not the best option available to you.

The average household in the United States has more than $9,300 in credit card debt. Experts say that if more than 20% of your take-home pay goes to financing non-housing debt or if your  rent or mortgage payments exceed 30% of  your take home pay, you may be overextended.

Other signs that you may be overextended include not knowing how much you owe, constantly paying the minimum balance due on credit cards (or worse, being unable to make the minimum payments) and borrowing from one lender to pay another.

There are many options for dealing with your rising debt, but first you must start tracking where you are spending your money. Begin with a budget.

Track all of your expenses over a monthly period, then break your monthly payments into two categories – essential expenses (includes mortgage/rent, food, utilities) and non-essential expenses (includes entertainment, dining out, $4 cups of coffee).

Once you see where you spend your money, you can find ways to reduce your monthly expenses. Maybe you adjust the thermostat a few degrees to cut utility costs, stop eating out at lunch or ride mass transit instead of driving in to work. The goal is to free up as much cash to pay off your debt as possible.

If the overall analysis of your situation leaves you with the impression that there is no end to your debt, maybe you should consider bankruptcy.

A qualified bankruptcy attorney can help you determine the best way to protect your interests should you decide to file bankruptcy. We offer a free initial consultation with a dedicated lawyer in your area

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