The holiday season is often a time when many people use credit cards to buy gifts for family and friends. When money is tight, many will make purchases using the cards, thinking that they will repay these balances after the holidays are over. Then, unexpected events arise, making it impossible to pay back what they owe.
A recent report by TransUnion, a credit reporting agency, stated that late credit card payments increased nearly 9 percent during the most recent holiday season over 2011 numbers. These payments were at least 90 days overdue, and show that many individuals are having problems making minimum payments.
If a person is unable to repay what they owe, late fees will be assessed and balances will continue to accrue interest. This can quickly escalate, which can mean serious long-term financial problems for debtors. However, there are options available that will allow individuals to regain control of their financial situation.
Some people may try to negotiate an agreement with their credit card company, in the hopes that they can reduce the credit card debts that they owe. These companies understand that if the debtor files for bankruptcy, they may not receive any payments for the outstanding balances.
There are many debt relief companies that promise they can reduce these debts, but people need to be cautious about the company that they enlist on their behalf. Several of these companies will charge outlandish fees, and keep all of the money. The debts continue to pile up, and the individual will be left in a much worse condition then when he or she started the process.
Others may decide to file for Chapter 7 or Chapter 13 bankruptcy protection. Bankruptcy allows individuals to eliminate their dischargeable debt, which can include credit card balances. Once a person files for bankruptcy, the automatic stay goes into effect, which means that creditors cannot harass or sue the individual for repayment while the process is ongoing.
The type of bankruptcy that is filed will depend upon the person’s financial situation. In Chapter 7, all of the dischargeable debt is eliminated after a one-time payment for legal fees and court costs is made. In Chapter 13, the debts are paid down in installments over a three- to five-year time period, depending upon the person’s ability to pay back the debts. Some people are required to pay very little of the debt, and others are required to pay back all of the debt. An attorney can assess the person’s particular situation and advise accordingly.
There are a lot of misconceptions out there regarding bankruptcy. You will not be forced to sell all of your possessions. You will not permanently destroy your credit rating. Filing will give you the time you need to get your finances back on track.
If you are experiencing problems making ends meet, speak to an experienced bankruptcy attorney about your situation. Your financial problems are unique, and you need a solution that is tailored to your needs. If bankruptcy is not the best option for you, you need someone that is not afraid to walk you through the other solutions, and help you make the decisions that will allow you to rebuild your finances.