Credit Card Debt Repayment

Annually, credit card debt discharge totals almost $20 billion from Chapter 7 liquidations alone. But blatant charge card abuse amongst our nation's population -- from college students, to working adults, and silver-haired retirees -- is wreaking havoc on card issuers, lending institutions, mortgagors, and retailers. Distressed debtors increasingly rely on credit cards, unsecured "plastic" cash, to bail them out of long-term secured obligations, such as home mortgages and auto loans. Living on borrowed money has become the norm and charge account abuse has become an American epidemic. Even at the risk of paying higher interest rates and fees, more consumers are depending on open-ended lines of credit to meet everyday living expenses. Groceries, fast food, dry cleaning and gas are all regularly charged, but no one seems to notice the extra fees, high interest, and penalties that can quickly accumulate. When borrowers constantly withdraw large cash advances to pay for big ticket items like house and car payments and casually use credit for everyday living expenses, the end result can only be financial ruin and eventual bankruptcy.

Chapter 7 bankruptcies force debtors to surrender personal property and disposable income to court-appointed trustees to settle outstanding creditor claims. Secured claims get first priority, while unsecured claims, such as credit card debt, usually get discharged. Over the last decade, borrowers have gotten wise to bankruptcy laws, fully understanding that credit card debt discharge goes hand-in-hand with Chapters 7 and 13 consumer debt protection. Some unscrupulous borrowers literally rob creditors blind by racking up thousands of dollars of valuable goods and services, only to file bankruptcy and benefit by unsecured credit card debt discharge. Since creditors hold no collateral, they have very little legal leverage when it comes to collecting. The courts sympathize with debtors who are unable to repay delinquent accounts due to legitimate circumstances; but the Bible speaks against those who buy on credit with no intention of repaying: "The wicked borroweth, and payeth not again: but the righteous sheweth mercy, and giveth." (Psalms 37:21).

Unlike secured debts -- mortgages, auto loans, student loans, alimony, child support and some taxes -- mounds of unsecured claims can be wiped clean with one discriminate wave of the bankruptcy judge's gavel; and creditors can do little to protest. Filing an adversary proceeding or alleging fraud against the borrower/debtor may be an option, but in a Chapter 13 proceeding, it may be to no avail. Credit card debt discharge in a Chapter 13 bankruptcy usually survives, even when fraud is suspected. Fraudulent charge accounts and filings have forced creditors and issuers to push for stricter bankruptcy reforms to prohibit debtors from abusing a system originally intended to help individuals who have a legitimate need for consumer debt protection.

When it comes to credit card debt repayment, creditors with unsecured claims, like delinquent charge balances, have a greater chance of settlement in a Chapter 13 proceeding. Petitioners' repayment plans are structured to satisfy creditors from regularly earned income. Wage earners promise to repay all non-exempt claims in monthly installments over a period of three to five years, monitored and enforced by court-appointed trustees. The advantage to the creditor is that most, if not all, outstanding balances will eventually be paid. However, any amounts left unpaid at the end of the maximum five-year term are automatically discharged. Repayment through Chapter 13 also helps borrower/debtors reestablish responsible borrowing power more quickly. A repayment plan presents a clear record of consistent and faithful payments, including credit card debt discharge, which demonstrates to potential lenders a commitment to honor future financial obligations. But credit card debt repayment doesn't have to depend on bankruptcy. Excessive spending is like a malignant tumor; sometimes it just has to be cut out! Wise consumers can take control over out-of-control spending by simply paying off one card at a time and cutting them up as soon as balances hit zero! Borrowers should avoid the temptation to apply for new accounts, even if issuers continue to make relentless appeals. Cash-strapped consumers may not be able to eliminate all delinquent accounts at once, but consistent payments on principals and interest will soon add up.

For larger credit card debt repayment amounts, borrowers may consider taking a home equity loan. Equity is the cash value of property in excess of interest against it. Borrower/debtors who have owned a home for a considerable length of time have built up cash value, which may be borrowed through the mortgage company. Home equity loans, known as second mortgages, allow borrowers to refinance property for more than what is owed and usually at a lower interest rate than was originally financed. The mortgage company pays off the first mortgage and draws up a second one at the lower interest rate. The homeowner pockets the difference and can use the equity for credit card debt repayment. The drawback to using home equity loans is that the money regrettably, has to be repaid. Borrower/debtors may use home equity loans to instantly clear up short-term unsecured obligations, only to incur the long-term liability of an additional 15- to 30-year mortgage, plus interest. Most consumers would think it ludicrous to pay for a $65 trench coat over a period of 30 years at an annual percentage rate (APR) of 24 percent or higher! But that's exactly what borrower/debtors wind up doing when they use long-term debt to pay for short-term charge card purchases. Eliminating revolving debt through disciplined and consistent payments over several years just makes a lot more sense. Distressed homeowners may fare far better by borrowing money from family or friends for credit card debt repayment and saving the home equity for financing college tuition or retirement.

Best Credit Cards After Bankruptcy

Credit repair after bankruptcy is possible and some companies online offer these services as well as tips on how to perform self-credit repair. The main goal when trying to perform credit repair is to keep in mind that new habits need to replace old ones, especially with spending habits that cause a problem in meeting monthly payment obligations. Remembering what caused the problem to begin with is important and a vital part of credit repair. Finding ways to re-establish credit is crucial and the best credit cards after bankruptcy can help accomplish this. Many banks offer charge cards to people in need of re-establishment with a low starting limit, and the interest and fees will vary depending upon the offer. Keep in mind that initially a higher interest rate and fees may be required because of the bankruptcy but as history is re-established there will probably be opportunities for a lower interest rate later.

The first step in trying to accomplish credit repair after bankruptcy will be to obtain a free annual copy of one's report from all three of the major credit bureaus. Since each bureau keeps separate records all three need to be worked on. A dispute form can be used through the bureau or a letter can be written to the bureau on any derogatory items that are incorrect. With each disputed item send as much documentation as possible to prove the validity of the dispute. The bureau has 30 days to answer any disputes and when there is not an answer from the creditor in question, the item should be removed from the report. One of the most important things to remember is follow-up of each correspondence. This process takes some time but can prove to help remove negative items from history and bring up scores. If the follow-up from the bureau doesn't prove to be desirable it is possible to add a 100 word statement to each negative item on a report. This allows the consumer to give their side on what happened.

Research on the Internet will prove to be helpful when trying to find a company that issues the best credit cards after bankruptcy. Some cards that are offered for this reason may require a security deposit that covers the current chargeable limit. These require the consumer to deposit money into a special bank account to use to draw against the charge limit. Some banks offer accounts that are unsecured but start with a low limit, including account fees and interest. The key to having this type of account is to keep the limit low so temptation doesn't allow for overspending and make the monthly payment amount on time. When companies evaluate a consumer for credit worthiness they often look at an overall credit score. Having good recent credit will bring up an overall score and look much better on a report than not having any, especially when there is a bankruptcy shown within the last couple years.

Companies that offer the service of helping consumers to raise scores will usually charge a monthly fee and offer ongoing services to monitor a report and continuously work on removing negative items. There may be an initial set up fee or consultation fee to get started with their program. Credit repair after bankruptcy allows individuals to have a second chance. It would be in each person's best interest to get some counseling from a consumer counseling agency on how to avoid future debt problems as part of an overall program. Check out non-profit or Christian agencies that offer these services on the Internet. One of the important ways to avoid debt problems in the future is by watching daily spending habits and not going into debt by applying for too many best credit cards after bankruptcy or installment loans. "And if ye have not been faithful in that which is another man's, who shall give you that which is your own" (Luke 16:12)?

Having to pay interest on too many charge accounts is a common way for people to get in trouble with debt. Limiting the amount of accounts and the spending limits will help to keep this in check. The best credit cards after bankruptcy are the ones that keep spending limits low with no additional fees and low interest. This might be hard to find for someone who has a bankruptcy on their history but as worthiness is re-established it may be possible to obtain an account such as this. For future history to be favorable there need to be recent accounts that are up to date but not too many accounts. Having too much debt will lower scores especially if the limits are maxed out. Credit repair after bankruptcy is something that can be successfully accomplished and there are many avenues to begin this process on the Internet.

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