The Credit Card Debt Trap and Other Unsecured Debt
Credit cards can be a debt trap - if you fail to pay off the balance each month, your debt and interest begins to snowball, making it increasingly difficult to pay down the principle due. If you use credit cards to buy food and other necessities, you may reach a point where just paying the minimum monthly due is difficult. Here, bankruptcy may be the best option for you: if you are unable to pay the minimum amount due or have to transfer balances from one card to another, filing for Chapter 7 or Chapter 13 bankruptcy may be the best way to regain your financial footing. While many assume that filing for bankruptcy will negatively affect your credit, we find with our clients that their credit scores generally improve from between 50-100 points approximately one year after filing for bankruptcy. Further, in the long run it may be better for your credit to declare bankruptcy. Filing bankruptcy begins the process of financial recovery rather than trying to keep up on credit card debt, unsecured loans, or medical bills. At the bankruptcy lawyers, our Orlando bankruptcy lawyers can evaluate your situation and determine if filing for bankruptcy makes the most sense for you.
Regardless of whether you can't pay off your credit card debt or are falling behind on loan payments and medical bills, contact the Orlando bankruptcy attorneys at the Kramer Law Firm to learn how we can help you.
Can't I just call a Debt Consolidation Company?
Companies advertising on television or radio offering debt consolidation services don't have legal leverage to require credit card companies to accept a repayment plan. As a result, any reduction in interest rates a debt consolidation company is able to negotiate is usually limited by what the credit card company is willing to offer. Further, some of these companies are known for taking advantage of consumers and are under investigation by various attorneys' general or other law enforcement agencies.
If you file for bankruptcy, your credit card debt will be erased (if you qualify for Chapter 7 ) or reorganized according to a repayment plan you create (if you file under Chapter 13.) As a result, filing for bankruptcy may actually save you thousands of dollars alone in the amount you pay off or in the interest on your debt.
Debt consolidation companies often charge a hefty sum for their "services," which is paid upfront in the payments you make to them. As a result, it may be half a year, or longer, before you actually begin paying down the principle on what you owe. Additionally, in some instances, as soon as a creditor is contacted by a debt consolidation company the creditor will call in a loan or file a lawsuit, concerned the debtor in question may file for bankruptcy.
We understand that bankruptcy is a last option for many people. If you do not want to file a bankruptcy, our attorneys will assist you with negotiating debts or defending any lawsuits filed against you. However, we also stand ready to file a bankruptcy if you choose that option now or down the road.
What about My Credit Score? Can I ever Borrow Again?
There are three credit reporting companies - Equifax, Experian, and TransUnion. Your credit and FICA score is a composite of the score assigned to you by all three. If you default on a loan, medical bills or credit cards, it will be reported to each credit reporting company, negatively affecting your overall credit score. However, your credit score is affected by a number of factors - your credit to debt ratio, the age of your accounts, whether you make payments on time, etc.
If you declare bankruptcy, your credit score may be lowered initially. However, most of our clients find that their credit scores actually improve from 50-100 points around a year after filing bankruptcy. We are often able to predict how much an individual's credit score may improve when we pull their credit report prior to filing the bankruptcy. Also, the vast majority of people qualify for a low balance credit card within months of filing for bankruptcy and many people are able to keep at least one credit card through the bankrupcty process. If you use your card responsibly, making payments regularly and on time, your credit score will increase, making you eligible for more credit and certain kinds of loans. Again, if you continue to use your credit wisely, most credit card companies increase the amount of credit for which you are eligible.
Are There Other Options in Dealing With Credit Card Debt?
If you are only able to pay the minimum amount due each month on your credit cards or are transferring balances between them just to stay current, bankruptcy may be your best option for regaining your financial footing. If you qualify for Chapter 7 bankruptcy, your credit card debt will be wiped clean. If you don't qualify for Chapter 7 but must file under the terms of Chapter 13, you can restructure your debt into a single manageable monthly payment. In some cases, our attorneys may be able to negotiate with a credit card company to reduce your interest rates or the amount you owe.
Contact Our Orlando, Florida Bankruptcy Attorneys
If your credit card debt is spiraling out of control, contact the Orlando bankruptcy attorneys at the Kramer Law Firm today to learn how we can help you. By taking steps now to regain your financial footing, you may be able to avoid foreclosure on your home and other complications that often accompany debt. We can evaluate your situation and help you determine the best course of action for getting out of debt and starting over.
