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How to avoid consumer debt traps

Even though debt levels dropped in the years immediately following the 2008 Great Recession, Americans have apparently begun spending again. New information shows that Washington, D.C., residents and other Americans owe more than $3 trillion in consumer debt through credit cards and a variety of other borrowing mechanisms. Today, we will discuss how you can avoid being sucked into this dangerous trend, which could lead you down the road to financial ruin. Sure, there are some times that credit card spending is necessary, but avoiding smaller missteps can help you build a financial history that will lead to a bright future.

A large number of American bankruptcies are related to medical debt. In fact, one in five Americans is struggling with health care expenses, as these charges become increasingly common and expensive. Even those with insurance are suffering under this burden. To prevent financial woes related to medical debt, keep an eye on prevention. Resist the urge to choose lower medical coverage in order to decrease your monthly premium, as you could end up spending more in the event of an emergency. Try to set aside money to manage your medication costs so you do not suffer even more serious woes down the line.

Student loan debt is also a crippling financial problem that can lead to a variety of negative consequences. Two in three bachelor's degree recipients have incurred student loan debt, and scores of others are still paying back loans for degrees they never completed. With tens of thousands in student loans, it can be hard to work your way back into financial solvency. Work together with the student loan administration groups to develop an income-based repayment plan. Your loans may even be forgiven under certain circumstances.

In some cases, bankruptcy may be the only solution to your financial problems. Bankruptcy can actually help you avoid a significant amount of consumer debt, and it can set you on the road to a positive financial future. Qualified bankruptcy attorneys can help you decide whether this course of action is right for you.

Source: www.foxbusiness.com, "5 common debt traps and how to avoid them" Alaina Tweddale, Dec. 02, 2013

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