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Credit Cards Are Forever
09 Aug 2012 10:24 #1
by Tim_Canty Esq
Credit Cards Are Forever was created by Tim_Canty Esq
As a bankruptcy lawyer, I see the damage done to people's lives every day from revolving debt. Credit cards can be useful (and are in fact almost necessary) in today’s world. Those who use them wisely are those who pay off the balance every month, They get to use the bank's money for little or nothing. But get real, most of us don't do that. It is so easy to spend and so hard to pay back.
Here's a little exercise that shocked me. Say you have $20,000.00 in credit card debt and the average interest rate is 21%. These are pretty common numbers. According to the Federal Reserve ( www.federalreserve.gov/creditcardcalculator ), your minimum monthly payment is $400.00. If you don't charge another cent and you make all your monthly payments on time, you will pay it off in only 110 years. That's not a typo! What is more, you will have paid $134,398.00 in interest.
Is there a way out of this trap? Actually, there are several. If you have a substantial sum of money to work with, most credit card banks will cut you a great deal – I've negotiated some 25% settlements. The catch is that you have to have some cash to work with and the 75% that you don't pay is considered ordinary income by the IRS and you will get a 1099-C and a big tax bill.
You could file a Chapter 7 bankruptcy and discharge all the debt. This works for some, but others are either not eligible or not comfortable with that option.
A third option is a Chapter 13. As you may know, it's a re-payment plan that lasts up to 5 years. You can pay back the $20,000.00 over 60 months for about $335 per month. At the end of 5 years, the debt is gone – they can't keep adding interest or late fees. Of course, if you can't make that payment, you can simply pay what you can afford – say $100 per month. The rest would be discharged just as in a Chapter 7. You can climb out of the trap.
Got questions? Get answers! Free Consultation.
Timothy Canty, Esq.
(303) 670-2185
[url=http://www.timcantylaw.com" onclick="window.open(this.href);return false;]www.timcantylaw.com[/url]
Federally designated debt relief agency
Here's a little exercise that shocked me. Say you have $20,000.00 in credit card debt and the average interest rate is 21%. These are pretty common numbers. According to the Federal Reserve ( www.federalreserve.gov/creditcardcalculator ), your minimum monthly payment is $400.00. If you don't charge another cent and you make all your monthly payments on time, you will pay it off in only 110 years. That's not a typo! What is more, you will have paid $134,398.00 in interest.
Is there a way out of this trap? Actually, there are several. If you have a substantial sum of money to work with, most credit card banks will cut you a great deal – I've negotiated some 25% settlements. The catch is that you have to have some cash to work with and the 75% that you don't pay is considered ordinary income by the IRS and you will get a 1099-C and a big tax bill.
You could file a Chapter 7 bankruptcy and discharge all the debt. This works for some, but others are either not eligible or not comfortable with that option.
A third option is a Chapter 13. As you may know, it's a re-payment plan that lasts up to 5 years. You can pay back the $20,000.00 over 60 months for about $335 per month. At the end of 5 years, the debt is gone – they can't keep adding interest or late fees. Of course, if you can't make that payment, you can simply pay what you can afford – say $100 per month. The rest would be discharged just as in a Chapter 7. You can climb out of the trap.
Got questions? Get answers! Free Consultation.
Timothy Canty, Esq.
(303) 670-2185
[url=http://www.timcantylaw.com" onclick="window.open(this.href);return false;]www.timcantylaw.com[/url]
Federally designated debt relief agency
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