Articles Tagged with Credit Card Debt

credit-cards-150x150Americans are in record debt – for the first time ever, credit card debt passes $1 trillion! Along with the skyrocketing of the country’s national deficit, a debt crisis is hovering over the private sector. New information shows Americans are more in debt now than at any point in history. According to the Federal Reserve, for the first time in our nation’s history, American credit card debt flew past the $1 trillion mark, with $250 billion in the last two years alone and $45 billion in the last quarter alone.  Just to put this into context, American credit card debt is now larger than the GDP of all but 17 countries on earth. Wow.

Even though some may think that reckless spending habits might play some role in this, the reality is that more and more Americans are being forced into credit card debt trying to pay off monthly living expenses. Over the last two years, as inflation has taken hold of the economy, the cost of necessary goods has hit the roof. A newly released report from Moody’s shows that the average American family pays $709 more now each month for the same goods they were purchasing in 2021.  With around 60% of Americans living paycheck to paycheck and 54% saying they wouldn’t be able to cover an unexpected $400 payment, it only takes a small monthly change to drive people into debt just to make ends meet. Another side effect of the Fed’s continuous rate hikes, the average credit card interest rate is now around 20% (which is the highest mark on record), translating to the cost of that debt being even higher.

Keep in mind that one of the fastest ways to negatively impact your credit score is to max out your credit card debt. It doesn’t matter that you’re paying on time nearly as much as it matters that you have maximized all available credit limits. If you are only paying minimum credit card payments monthly, you will be paying on that credit card debt for years and years. It will take a long time to ever pay down this debt, even enough to the point to regain traction on your credit score.  One small change in your income or overall financial situation can then cause late payments, which tank your credit score even further.  Without a decent credit score, lenders are unwilling to provide you with debt consolidation loan options.  Or if they do, they are at enormous interest rates. Many consumers, over the past two or so years, have consolidated their credit card debt only to then again run up the credit cards that were paid off in the consolidation.

Each one of these things can have serious consequences depending on the plan we develop for dealing with your debt, so:

1. Don’t borrow any more money. Don’t take out a second mortgage.
2. Don’t take money out of your retirement, 401k, or IRA.
3. Stop using your credit cards. Don’t use the convenience checks and don’t take cash advances. Don’t do “balance transfers” from one credit card to another.
4. Don’t keep your money in the same bank or credit union where you owe money. Stop all direct deposits into that account and redirect them to a different bank. Continue reading

credit cardsCan you pay your credit cards after filing bankruptcy?  Of course. You can pay anyone you want to pay. But should you? Let’s explore whether first of all you can keep them, and second if you have anything to gain by paying debts that were wiped out by the bankruptcy court…

Can you keep your credit cards after filing bankruptcy?  You should know that your credit cards will be canceled by the creditor once you file bankruptcy.  Even if you want to keep them and continue to pay, they will be canceled.  Credit card companies are constantly checking your credit reports and the moment they see the bankruptcy they will cancel the card.  This is a surprise to many people who thought that by not listing one or two cards in their bankruptcy, they could keep using them.  No company is going to let you keep a credit card. They all want you to reaffirm the debt and pay it off, but they will not extend the current credit privileges, even if you agree to pay what is owed. Now after filing bankruptcy, you may get flooded with new offers for credit cards (some offers may even be from the same companies!) but they will not allow the current account to remain open.

Why? Once a debt is discharged in bankruptcy, the creditor can’t have any contact with you. No letters, no phone calls, no law suits, no efforts to collect, and no reports to the credit bureau. You can sue them if they violate these rules. So if you repay the debt, the creditor can’t and won’t report it on your credit record. They will take the money, but you won’t any recognition or credit for paying it.

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