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100k In Credit Card Debt Is No Reason To Go Bankrupt
A local business man took the time to talk to me about how credit card debt is a major player in today's bankruptcy filings. Years ago bankruptcy was only used by businesses to obtain relief from debtors. Today 1 out of every 7 people has filed bankruptcy and walked away from thousands of dollars of credit card debt.
With aggressive marketing tactics used by credit card companies to lure in consumers it is very easy for credit card debt to be accumulated at a young age. Kids 17 years old are now starting to receive credit cards in the mail because the credit card companies know that when the bill comes the parents can always cover for their kids.
Credit card companies today offer credit limits that can easily be over extended considering the circumstances surrounding how the cards are used. Most families use credit cards as a crutch in order to supplement their income. The first time maybe its a vacation then a water heater and tires for the car. Without adequate savings and planning most of these expenses can be guaranteed to go directly onto credit cards with the intentions of repaying over time.
The bills are climbing and your income is remaining the same or deteriorating. Now the bills have climbed from 15k to 45k because of a medical expense and time off from the job. The payments are over $1,000/month and your budget is strained again. Most would look into refinancing the house at this point however based upon the individual credit score and debt to income ratio you may or may not qualify for that loan. Refinancing your home is only an option when you have the equity available and your debt to income ratio is working in your favor.
You cannot refinance and 1 year later after expense and other bills the debts have climbed from 45k to 65k and this process and revolving debt cycle continues to accumulate to the point that you have exceeded 100k after some time. This can for most people cause panic and irrational thinking.
Take a look at what you have working for you before you submit to filing bankruptcy thinking that it is your only option. The creditors have a lot to loose financially. With so much debt creditors will be very nervous about the recovery of these debts. When the credit card companies loan you money they do so based upon a formula that includes credit score, income and other payments on other accounts. When they loan you the money they calculate the risk involved and have worked into the equation that some of the accounts will not be a big payout for them. As an added bonus for the creditor there is a bit of reward for these account that do not get paid in full because they can claim the losses for tax purposes and file insurance claims on monies not recovered.
When a consumer files bankruptcy the creditor in most cases gets very little money and the consumer has there credit tarnished for 7-10 years or more. This option is not very appreciated by the creditor considering that most creditors work with debt settlement programs to settle on the amount owed. Debt settlement companies have set the tone for the new collection age. If a credit card holder falls behind on his/her accounts the credit card company will need to hire a collection agency to attempt to collect the debt from you at this point. These collectors are truly just trying to do there job however most consumers get turned off by the tone of voice and embarrassment they place on the consumer. Collection agencies are also notorious for lying and being deceitful about your account and they also do not care about the other bills and debts you have to pay as well.
100k in credit card debt can be settled in a debt settlement program for about 50% of the total amount owed. Doing the math on this type of a program would be easy actually taking advantage and getting out of debt is another story. Debt settlement programs are designed for those consumers that can no longer afford to make the monthly payments to the creditors for the debts that they have and cannot see a reasonable resolve on their own. Participation in debt settlement programs is client based.
The creditors that you have 100k in credit card debt with are gong to need some reassurance that you have intentions of paying back the amount in the settlement program. With debt settlement companies most likely having handshake agreements with creditors can assure the creditor that their clients are serious and can usually back up those statements with a financial hardship letter and proof that you are making payments in order to settle the account that you owe for about half.
Debt settlement programs can typically help these 100k in credit card debt situations but sometimes bankruptcy is the only option that can be affordable by the consumer.
Roger Brown
Credit And Debt Specialist http://www.fdnsolutions.com
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