The Federal Reserve says credit card debt was second on the list of consumer debts in 2014. Financial advisors also say that a significant number of consumer bankruptcy filings involve overwhelming credit card debt nationwide, including in Louisiana. They say the reason for this is consumers forgetting to manage their credit card use. Reportedly, most users are not as careful when using their credit card as they are when spending cash. Very often, this results in the consumer becoming overwhelmed by debt.
Credit cards tempt consumers to live beyond their means. It is so easy to supplement income with a credit card to buy things deemed necessary. Very quickly, one can only afford to pay the minimum amounts on the credit cards. By leaving balances from month to month, excessive interest accumulates and balances get more challenging to pay off. Once a consumer has fallen into the minimum payment trap, late payments become the next step.
Any other unexpected incidents such as job loss or illness can lead to missing payments or late payments. This, in turn, can lead to increased interest rates or the cancellation of the card by the bank. This can hurt the consumer’s credit score, and when he or she cannot catch up with the outstanding amounts, lawsuits, wage garnishments or other complications may follow. Canceling the credit card that brought all the problems may remove the temptation of spending more, but can damage credit scores even further.
Perhaps the best way to handle overwhelming credit card debt is to discuss the circumstances with an experienced Louisiana bankruptcy attorney. This will allow the consumer to weigh the various debt relief options and compare it to the protection offered by the Bankruptcy Code. With the support and guidance of a seasoned lawyer, a consumer may have all credit card debts discharged in bankruptcy and come out facing a fresh financial start.
Source: bills.com, “Avoid These 7 Credit Card Mistakes“, Daniel Cohen, Accessed on Dec. 23, 2016