In the first quarter of 2018, California residents and Americans throughout the country owed a total of $13.21 trillion in debt. Of this total, $1.41 trillion was in the form of student loans while they owed another $815 billion in credit card debt. For those who are interested in paying down their balances, the first step is to learn more about the balances that they owe.

For example, debtors should know the interest rate on a loan, whether it can change and how long the loan will take to repay. It is also important to know how often the interest on a balance will compound. Depending on the type of debt a person has, it may be possible to discharge it through bankruptcy. This may be ideal for those who only paying the interest on a loan or are otherwise struggling to reduce their principal balance.

However, it may be best to work with creditors to negotiate a new payment plan and avoid bankruptcy. Those who own a car or a home will need to keep making payments on those assets if they wish to keep them during the bankruptcy process. Debtors who want to work on paying down their debts without bankruptcy should decide which debts to focus on first. Ideally, individuals will start with balances that have the highest interest rate.

Filing for Chapter 13 bankruptcy may be an option for those who are trying to get a handle on their debt. It may allow a debtor to retain property while repaying creditors over a period of three or five years. In some cases, bankruptcy may give a debtor enough time to renegotiate secured loan terms. This is because creditors are generally not allowed to repossess property while a bankruptcy case is still open.