Paying off debt

People who are struggling with debt in Texas may be looking at debt management programs that can help them pay down their bills. One common strategy for paying bills is the so-called “debt snowball.”

The “snowball” works like this: A debtor makes a list of all of his or her debts and organizes them by smallest to largest. While continuing to make minimum payments on all debts, they begin to chip away at the smallest debt by making extra payments. Eventually, the smallest debt is eliminated and the debtor goes on to repay the second smallest debt. Eventually, the individual ends up paying all of the debts on the list and (hopefully) becomes debt free.

Some people have questioned this strategy because debtors can end up paying more interest over time. The suggestion is to prioritize debts by interest rates, paying off those that are costing the debtor more first. One financial expert counters that unless the debtor is planning on paying off debts for several years, the amount of savings is often minimal. Instead, people are more motivated by a sense of accomplishment when a debt is paid off. By encouraging debtors to pay off small debts first, the person who is in debt is more likely to stick with the plan.

In some cases, even well-organized debt repayment plans simply aren’t enough to get a person out of debt. For those individuals, seeking debt relief by talking to an experienced bankruptcy attorney may be a good option. A lawyer might be able to assess the client’s financial situation and make recommendations regarding possible repayment versus declaring Chapter 7 or Chapter 13 bankruptcy.