Americans have a total of 1.04 trillion in credit card debt, with 55% of households carrying a balance from month to month. When the typical interest rate on credit card debt is 16.46%, you, like many other families, are likely paying hundreds of dollars a month just to cover the interest payments on your outstanding credit card balances.
Without the protections of bankruptcy, creditors could obtain judgments, garnish wages, and seize assets to enforce collection actions against you, leaving you without the money needed to live.
The US Bankruptcy Code provides a safety net for consumers who encounter a long-term financial crisis. When you cannot keep up with your current debt payments and do not anticipate being able to turn things around in the near term, bankruptcy can prevent financial ruin.
Each month, you continuously juggle which bills to pay and which ones to puh off until the next paycheck comes in because your monthly payment obligations are always more than your take home pay. As the months’ pass, you watch your balances continue to grow, little by little, while you begin to wonder how long you can live like this before something gives.
Most adults have a credit profile and credit score but do not necessarily understand how this data is tabulated and how it affects your financial life. Your credit score could determine if you get approved on a credit application and how much you will pay in interest and fees. Improving your understanding of what credit is and what steps you can take to build a strong credit profile could make it easier to get a loan and allow you to save money and improve your personal finances in the process.
Credit counseling services help consumers with overextended credit, and high credit card debt levels improve financial management skills. Credit counselors work with consumers to regain control of their finances and pay off existing debts through a debt management plan or DMP.
When credit card balances surpass $10,000, it becomes increasingly challenging to pay off creditors because the monthly interest charges make up the majority of your minimum payment. For instance, you might pay $200 a month towards your debt, but the interest could be over $180, leaving little going toward principal reduction.
Chapter 13 bankruptcy grants legal protections when you are unable to repay creditors in full. The code provides an immediate stay on court actions to collect debts such as wage garnishments or foreclosure proceedings. You also gain time to catch up on bills and make partial payments on unsecured debts before any discharge occurs.
Rolling over credit card balances month after month can cost you thousands of dollars in interest every year. The combination of low required minimum payments and double-digit interest that compounds daily can also mean extending the payoff over three decades when paying only the minimum amount due, even if you stop using all your credit cards.