By Evan Vitale
We all have some level of debt – a mortgage, a car payment, etc., but big-time debt could include past-due tax liabilities and a mound of credit card debt.
However, even if you feel like you are “drowning,” there are plenty of options and steps you can take to manage it better and get out of debt before you even consider bankruptcy.
First, let’s discuss past due tax debt. If you owe the Internal Revenue Service (or any state or local authority), this is something you should take care of right away. The IRS is more than willing to work with you on allowing for monthly payment arrangements (more on that in a future blog post).
The worst thing you can do (or not do) when it comes to ignoring your tax debt is to ignore it. Believe me, it’s not going away. Ignoring “past due” statements only increases your debt with additional interest and fees, but the correspondence will become more severe until you eventually face possible garnishment.
Do not ignore your tax debt.
When it comes to credit cards, the best thing you can do in order to handle this amount of debt is to stop using your credit cards. Just stop.
If you have multiple card cards, read your statements and figure out which card is charging you the most amount of interest and then focus on paying off the balance.
Another theory to handling credit card debt is to pay off the smallest debt first and move on to the next lowest card, etc. Some choose to pay each card each month and this is good, but you’ll need to may an effort in making sure your payment is larger than just the minimum due.
If you only pay the minimum amount due, it will take you a long time to pay off that credit card because of the interest charged.
Again, take a look at the interest each credit card is charging you and make proper payments accordingly.
In our next blog post, we’ll take a more in-depth look at how you can pay off your tax debt.