0015 - Debt Related Queston: Bankruptcy Question # 0015

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QUESTION #0015:

How much of my income should be paid out to creditors? Which creditor should I pay first? What is the best way to organize my payments to reduce my debt load, or even pay off everything?



ANSWER:

According to the Bureau of Labour Statistics, the average Canadian uses 5% of their income for debt repayment. To pay down your debts, you first need to stop using your credit. Budget for a maximum of 15% of your after tax income for debt repayment. This 15% should be enough to pay more than the minimum due to each creditor every month. Pay the largest amount to the balance with the highest interest first, then the next highest interest rate, and so on. The secret to paying off your debts isnít really a secret, itís old-fashioned budgeting, and the reality of living below your income. If 15% of your after tax income isnít enough to meet the minimum payments, this is a sign of problem debt, and financial restructuring should be considered