The Truth About Credit Card Debt and Bankruptcy

Americans love their credit cards. They are convenient, fast, easy to get and allow you to buy something you otherwise could not afford. There is a dark side to credit cards though. The companies behind them have created a system that forces people to maintain balances, pay high interest rates, and keep the credit card companies profits high.

Ridiculous Interest Rates

Credit card companies charge interest rates that border on loan sharking. As a matter of fact, credit card company lobbyists have been fighting tooth and nail to make sure the US and State Governments don't lower the allowed credit card interest rates any further. Current federal law does not place a limit on credit card interest rates, instead, each state has there own laws regarding this. That is why many credit card companies will set up shop in states like Delaware and North Dakota, where the laws generally favor the banking industry.

Are These Exorbitant Late Fees Legal?

It is not uncommon for credit card companies to charge $30 or more of you are even one minute late. Unfortunately, there is no law protecting consumers from this high cost. The fact is, debtors signed a contract to make timely payments in return for a line of credit. As far as the Court is concerned, you are obligated to make your payment on time or suffer the consequences.

Printing Money

Combined with high interest rates, "non-usage" penalties and other fees, credit card companies have created a money making machine. The problem is that all this profit comes at the very real cost of American lives. People are drowning in debt, and the credit card companies are holding their head underwater.

They don't want debtors to pay off the principle, just keep on making those minimum payments so the credit card executives can get that $5 Million bonus. The longer you keep a balance, the more money these companies can earn in interest and penalties. Miss a payment? Great! Tack on some more fees.

Why Credit Card Companies Hate Bankruptcy Laws

The US Bankruptcy court favors the debtor in these situations, and the credit card companies know it. Once a bankruptcy petition is filed, these companies are likely not going to collect another dime.

The bankruptcy courts will ensure debtors are able to get back on their feet and pay important bills, like a mortgage, car payments and other necessities. The credit card companies are at the bottom of the list, and in most cases, people who file for bankruptcy protection will have all of their credit card debt wiped out immediately.

Now, there are consequences of filing for bankruptcy, mostly in the form of a reduced credit score. But the reality is, if you are one of the millions of Americans stuck in the credit card hole, your credit score is probably going down the drain anyway. Filing for bankruptcy offers a way to get back on top of bills and make timely mortgage payments, so that, after a few months, your credit score will start climbing again.

Think Bankruptcy Might Be for You?