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Important advice from a New York bankruptcy judge

If one of your New Year’s resolutions is to get your debt under control, a bankruptcy judge in New York’s Northern District has some valuable advice. She notes that while sometimes the events that lead to bankruptcy are outside people’s control — like a job loss or an illness that results in exorbitant medical bills — many of the factors that lead to bankruptcy filings are controllable.

The judge is involved in community financial literacy programs for students, women in shelters, immigrants and others. She emphasizes the value of financial literacy for everyone, starting at a young age. She has some other important tips that can help people avoid ending up in her court. Among them are the following:

Keep track of your spending

Write down every expense, no matter how small. This will help you see where your money is going. You may be surprised. That $5.00 cup of coffee you pick up on the way to work may not seem like much of an expense, but all of those small purchases add up.

Commit to setting aside a certain percentage of your income

If your employer has a 401(k) program, you can have a portion of your paycheck go there every pay period without having to think about it. If you don’t have an employer-sponsored program, commit to saving a portion of each check some other way. The judge notes that many people who file for bankruptcy have little or no savings to cover unexpected expenses of even a few hundred dollars.

Watch your credit cards carefully

Ideally, people should never have a credit card balance. If you have to carry a balance, pay it off as soon as possible. The judge cautions people to review their credit card statements carefully. This not only helps ensure that you weren’t charged for something in error or fraudulently. It helps you see where your money is going. You may have placed a recurring expense or donation on your card and then forgotten about it, for example.

Has a series of decisions or events, like becoming unemployed for a long period, caused you to become overwhelmed with debt and impacted your ability to handle basic living expenses? Bankruptcy may be your best option for getting back on the path to a healthy financial future. An experienced attorney can provide valuable information as you make your decision.

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