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New Jersey bankruptcy: Debt relief traps consumers fall into

Consumers around the country and in New Jersey are often working to pay off their debt. Many people, however, fall into financial management traps that can actually sabotage their efforts. There are certain debt relief strategies that come just short of bankruptcy that consumers may believe are the prudent thing to do, but could end up costing a consumer more in the long run.

People who have money in savings will often use those funds to pay off debt. This may seem like a good idea at first, but what happens if there is an emergency such as car or home repairs? People often end up going back into debt or even deeper in debt to take care of those emergencies when they could have used their savings. Additionally, simply paying off the debt doesn't eliminate the behaviors that caused the debt in the first place.

A better course of action may be to sit down and devise a debt elimination plan. This plan can begin with reviewing spending habits and identifying financial goals. Once this is done, extra money that was found by cutting costs can go toward paying more than the minimum payment.

New Jersey consumers may try to pay down debt without making changes in their financial management. Making some adjustments in spending and putting that saved money toward paying off debt can go a long way toward eliminating debt. If making adjustments in the budget isn't enough to get out from under debt, bankruptcy can help remove most, if not all, of a consumers debt. Filing bankruptcy and creating a financial plan for after that debt is gone can give any consumer a new lease on life--at least financially.

Source: foxbusiness.com, 5 Mistakes You Make When Managing Your Debt, Allison Martin, Aug. 20, 2013

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