The average American household carries almost $10,000 in credit card debt. When this is added to the mortgage and auto loan found in the typical home, the debt can become overwhelming. The prospects of managing financial obligations have just gotten worse, as Congress has passed legislation that will make bankruptcy filings more difficult than ever.



In addition, the major credit card companies, at the urging of the Federal government, have recently doubled their minimum monthly payment to about 4% of the outstanding balance. For the average family, that means an additional $200 per month that must be paid for credit card debt and many families simply cannot afford that extra money. If you are in such a predicament, what can you do? Here are four tips that may help.

• Stop spending on things that aren't absolutely necessary. Each individual will have to define what “necessary” means, but it may mean taking a sack lunch to work, bringing your own coffee instead of stopping at Starbucks, and canceling that subscription to HBO. These things may seem small, and certainly that mocha from the coffee shop isn't going to pay your credit card bill, but these things add up. In total, they could amount to several hundred dollars each and every month, and that could help reduce your credit card bills. Every penny counts!

• Consider consolidating your debt, if possible. That means moving debts from one account or more accounts with high interest to an account with low interest. Many credit card companies offer promotional, low interest rate deals if you transfer a balance from another account. By moving balances from an account with 20% interest to one with 10% interest, you could save hundreds or even thousands of dollars per year. If possible, you might consider a home equity loan or line of credit, which allows you to borrow against the value of your home. The bonus for doing this is that your interest is tax deductible. Be careful, however. If you don't stop wasteful spending and fail to pay the equity loan, you could be risking losing your home!

• Find a reputable credit counselor. Soon to be required for anyone filing for bankruptcy, credit counseling is business that helps people become financially responsible. Credit counselors will help you learn to manage money and can help you repay your debts by working with your creditors to establish an affordable repayment plan for you. The service isn't free, but the fees are usually tailored to your ability to pay.

• File for bankruptcy - This should be the last resort, as a bankruptcy filing will appear on your credit report for ten years and can hurt you in your future attempts to buy a home or a car. Nevertheless, the law does allow you, as a last resort, to petition the courts to have your debts waived so that you can obtain a fresh start. Be aware that new laws taking effect soon will make it more difficult and expensive to have debts wiped out through a bankruptcy filing. If you think this is the option you should use, call an attorney now.

These four things should help most people get a rough idea of how to manage their debt.