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Credit card debt: Top causes and possible solutions

Do you have one or more credit cards that are currently maxed out? If so, you are definitely not alone in your struggle, as many people in Tennessee and beyond are facing or have already successfully overcome similar problems. Your financial situation may not be exactly the same as your neighbor's. However, you may relate to one or more of the common reasons people wind up with serious credit card debt.  

Once you understand what led to your current financial crisis, you may be able to determine a best course of action for resolving it. While the details of an individual financial situation may vary, many people encounter similar challenges along the way when it comes to global, local or personal economics. By tapping into available resources, you may be able to get things back on track and lay the groundwork for a stronger financial future.  

Credit cards and interest rate details

People in Tennessee who may have struggled with credit card debt know that trying to understand the various terms and conditions associated with these accounts can be very difficult. In fact, for some people, a lack of full understanding about how interest or fees are calculated and assessed may actually contribute to making one's debt problems worse. Therefore, it is important to be educated about these things to prevent further problems.

As explained by Capital One, any credit card will come with an associated annual percentage rate, or APR. This directly correlates to the amount of interest a person might be charged for use of the card. The APR amount is not the percentage that is charged every month but cumulatively over the course of 12 months. A 36-percent APR means a person will have interest assessed at a rate of three percent per month.

How secured credit cards help after bankruptcy

If you are one of the many residents in Tennessee who has struggled with high revolving credit card debt, you know the level of stress that can cause. You might be afraid to get your mail or email or to answer your phone due to fears that creditors are trying to get you to pay your bills that you are unable to pay. If you are thinking about bankruptcy as an alternative to help you get out from under this mound of debt, you may be then concerned about if you could ever get credit again.

The good news is that obtaining credit and building a healthy credit score after filing for bankruptcy is very much possible. While you may not get the best cards with the best terms right out of the gate, you may well be able to get a credit card sooner than you think especially if you leverage a secured credit card.

Massive debts prompt restaurant owners to seek Chapter 7

Most may assume that a Chapter 7 bankruptcy is something only individuals seek. The common assumption may then be that when businesses in Tennessee file for bankruptcy, they instead choose to file under Chapter 11. There may be logic in this line of thinking; after all, a Chapter 11 bankruptcy allows a company to reorganize is management structure and present a new plan to its creditors that details its road back to success. Yet in those cases where a company's leadership may not have any plans to stay in business, then the potential of having some of the company's business debts discharged through a Chapter 7 filing might be more attractive. 

Anyone that operates a business may know exactly how fast it can accrue debt. That is exactly what a now-defunct restaurant and bar in Louisiana is facing. It opened to great fanfare on 2013, offering patrons high-end beers whiskeys. Yet its revenue had been on a steady decline over the last couple of years. Not even introducing a full restaurant menu late last year was able to slow its financial freefall. Currently its owners list only $265 in assets compared to over $212,000 in liabilities. After closing their establishment's doors earlier this year, the ownership group has now filed for Chapter 7 bankruptcy. 

What are the penalties for missed credit card payments?

The prevalence of consumer debt in America may prompt you to believe that you should avoid having credit cards altogether. Yet financial experts in Nashville do not typically discourage having credit cards (on the contrary, many actually recommend holding three or four for the credit benefits they offer alone). However, proper management is the key to enjoying the benefits that credit cards can provide. Yet there may come a time when funds are tight, and you may think that missing a monthly payment (with the intention of making it up the following month) is fine. This, however, prompts the question of what penalties a credit provider is allowed to assess for missed payments? 

According to Credit Karma, the most common penalty assessed by credit providers for missed payments is a late fee. These can be imposed the day after a payment due date. Additionally, if you are over your credit limit, you could be charged a fee for that, as well. If you are more than 30 days delinquent with your payment, your credit provider can report a missed payment to any of the three major credit bureaus. Ultimately, payment histories account for roughly 35 percent of your credit score, so staying current is an easy way to maintain a strong rating. 

Financial problems? Perhaps bankruptcy is a possible solution

Any type of financial decision you make requires an informed thought process and careful discernment. Especially if you're considering filing for bankruptcy because things have gotten a bit out of hand. It is critical that you research what types of options are available and determine which seems most viable in your particular situation. Filing for bankruptcy is not the end of the world; in fact, many Tennessee residents have used it as a means to overcome serious financial problems and to lay the groundwork for restored financial stability in their future. 

There are several bankruptcy categories. Before you can determine which option is most viable in your particular situation, it may be helpful to learn more about the process and how various types of bankruptcy may impact your immediate future as well as your financial status years from now. If you know someone who has filed for bankruptcy in the past, speaking to him or her may also help you streamline your own plan. There are also experienced support networks in place that can point you in the right direction. 

Revoking a discharge from a Chapter 7 case

A significant portion of Nashville residents may presume that bankruptcy laws are misused. This likely comes from stories of celebrities or other people who are perceived to be "well to do" filing for bankruptcy yet continuing to enjoy seemingly lavish lifestyles. The truth, however, is that several regulations are in place to keep people who might be trying to use a personal bankruptcy for uses other than what it has been intended from doing so. 

Chapter 7 filings are by far the most popular form of personal bankruptcy (with the American Bankruptcy Institute showing 472,190 of such cases being filed in 2017 alone). The main reason this particular type of bankruptcy is popular is because it allows certain types of debts to be discharged, freeing a debtor from having to settle them. This may be attractive for those who simply do not have the resources to meet all of their liabilities. Yet a discharge does not necessarily mean that a debt is gone forever. 

Former governor's first lady files Chapter 13 bankruptcy

It might be easy for those in Nashville who are struggling with debt to think that the answer to their problems is to simply make more money. This no doubt comes from the perception that an abundance of income can easily overcome one's liabilities. Yet there are countless cases out there suggesting the contrary. People at all income levels may be subject to financial struggles, many of which are due to a plethora of circumstances. Some might be saddled with unexpected medical expenses; others might simply struggle in effectively managing their money. Then there are those who face a seemingly perfect storm of dire financial circumstances. 

Such seems to be the case with a former first lady of the state of Oregon. Her financial woes may be traced back to 2014, when question arose about the propriety of her mixing elements of her public role as first lady with her private business. A local news publication attempted to secure her emails, to which she sued in an attempt to conceal them. She lost and was ultimately ordered to pay over $125,000 in legal fees. Apparently, she was struggling to line up work for her career at the time, which prompted her fiance (the governor) to deposit funds in her account to help her meet her expenses. This influence-peddling scandal would eventually force him from office. Her troubles (which have prompted her to file for a Chapter 13 bankruptcy) could be compounded if the current investigation into her conduct by the state's government ethics commission results in further fines. 

Bankruptcy court must approve your Chapter 13 repayment plan

Many people consider bankruptcy an intimidating process. You may also hold this idea, and while it certainly is a complex legal process to go through, you do not have to feel so intimidated that you choose not to consider it a debt relief option. If you earn a steady income and face substantial debt, you could qualify for Chapter 13 bankruptcy.

With Chapter 13, you work with a plan to pay back your creditors over the course of three to five years. However, not just any repayment plan will do. You must create a plan, present it to the court and have it approved. This part of the process is known as confirmation.

What is an automatic stay?

Many in Nashville often ask "when does filing for bankruptcy become your best option in dealing with your debt?" Unfortunately, there is no easy answer to that question. There may be cases where simply "tightening your belt" for six months to a year would allow to get your debts back under control. However, there may come a point where multiple creditors are looking to initiate collection activities against you, which could serve to further compound your struggles. In these situations, the automatic stay afforded through a Chapter 13 bankruptcy could prove to be beneficial. 

What is an automatic stay? Simply put, an automatic stay halts collection activities in many (but not all) situations. Upon you filing for a Chapter 13 bankruptcy, the bankruptcy court clerk or trustee assigned to your case will notify all of the creditors (whose information you provide him or her with) of your case. This calls for the cessation of all activity being taken against you, including: 

  • Lawsuits
  • Wage garnishments
  • Collection calls

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Rothschild & Ausbrooks, PLLC
1222 16th Avenue South, Suite 12
Nashville, TN 37212

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