When Colorado residents get stuck deep in debt, there are limited options for how to break free from the crippling debt. What's more, some of the options that have the potential to help can actually make matters much worse.
A good example of this is with high credit card debt. Even with relatively modest balances, such as a balance of $7,500, it can take decades to pay off the debt with a high interest rate on the card, which is even assuming the person can make the minimum payments on the debt. The situation only gets worse if a person has delinquent payments, as penalty rates can apply and the balances can mount up quickly.
Individuals might also fall victim to moving their credit card debt by a balance transfer to a different card with a zero percent interest rate. If the person does not pay off the debt within a set period under these cards, they may be stuck with a higher interest rate than the original interest rate.
It is no wonder that, when faced with such options, many individuals turn to the only option that can clear the debt off their books for good - bankruptcy. By filing for personal bankruptcy, individuals can ensure they will discharge their unsecured debt, including credit card debt.
Rather than having to worry about paying off the debt for decades, the person can discharge the debt within a relatively short period of time. The debt discharge in bankruptcy is permanent, meaning creditors can no longer take any actions to try to collect on the debt that has been discharged. Accordingly, through bankruptcy, the person will no longer be personally liable for the debt that has crippled them for months or years.
Source: Fox Business, "How do I pay off $7,500 in credit card debt?" Janna Herron, April 17, 2014