Category Archives: Credit Card

DALLAS BANKRUPTCY ATTORNEY: USING HOME EQUITY LOANS AND TITLE LOANS TO PAY OFF CREDIT CARDS MAY BE A BIG MISTAKE

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Credit card debt has a way of getting out of control.  Small balances can quickly become financial burdens when a missed or late payment results in late fees and an increase in the interest rate.  One strategy for dealing with this type of problem is to refinance the debt.  If you find yourself in this situation, and are looking at ways to pay off your credit card bills, do yourself a favor and keep your eyes averted from your home and your car.

 

It might be tempting to apply for a loan using your home or car as security.  You will generally get a lower interest rate by providing security to the lender than you would with an unsecured loan.  However, by giving the lender a security interest in your house or car you are giving them the right to take your property if you default on the loan.  Before you use your house or vehicle as collateral, step back and take a hard look at your financial situation.  Are your financial troubles the result of bad spending habits?  If after reviewing your income and a realistic budget you believe you can afford your house, car and other household expenses, plus a payment associated with a home equity loan or title loan, then taking out a loan to pay off your credit cards may be a good idea.

 

However, if after reviewing your income and budget, you realize that you don’t earn enough money to meet all of your financial responsibilities, then taking out a home equity loan or title loan is going to cause your home to be foreclosed or your car to be repossessed because eventually you will default on the loan.  If you are in this situation, consider ways to reduce your monthly expenses.  This may mean selling your home and finding a less expensive place to live or downgrading your vehicle.  You are generally better off if you act proactively to resolve your financial situation before you default on your secured loans because it gives you the opportunity to extract any equity from the property rather than losing it to the lender.  If after reviewing your financial situation you realize that you cannot afford to repay your debt, consider speaking with a bankruptcy attorney.

DON’T USE HOME EQUITY LOANS TO PAY OFF YOUR CREDIT CARDS!

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DON’T USE HOME EQUITY LOANS TO PAY OFF YOUR CREDIT CARDS!

I have to admit, that I am a little behind the times technologically.  I still have basic cable at home and I don’t have a DVR.  So while many Americans can simply fast forward through television commercials, I actually watch them.  One common theme in television commercials these days is the benefits of taking a home equity loan to pay down your credit cards.  But sometimes taking home equity loans to pay off credit card debt is a very bad idea.

 

When considering whether or not to take out a home equity loan, I suggest you crunch the numbers and consider your situation in this way.  If you are not struggling to make your credit card payments each month, but would like to pay off your credit card balances in order to get rid of those high interest loans, then a home equity loan may be a good idea.  But if you are struggling to make the minimum payment on your credit cards, then you will probably struggle to make your second mortgage payment after receiving a home equity loan and in that situation a home equity loan could end up costing you your house.

 

When you take out a home equity loan to pay off your credit cards, you are reducing your interest rate but you are also turning an unsecured debt into a secured debt.  When you default on a credit card debt, you risk being sued.  However many people that default on their credit cards never get sued, and after four years the statute of limitations will bar the credit card company from recovering on the debt.  Even if you get sued most of your property is probably exempt from being taken by your creditors, and you may be able to stop the lawsuit by filing bankruptcy.  When you take out a home equity loan to pay off your credit cards, you are turning your unsecured debt into secured debt.  Now if you can’t make your payments and you default on the loan you will lose your house.

 

Lewisville Texas Bankruptcy Attorney: LEGISLATION PROTECTS COLLEGE STUDENTS FROM PREDATORY LENDING

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Lewisville Texas Bankruptcy Attorney: LEGISLATION PROTECTS COLLEGE STUDENTS FROM PREDATORY LENDING

When I went to college, students didn’t just get degree.  They also accumulated huge amounts of credit card debt.  Anyone who has attended college during the last ten years can tell you that credit card applications were offered to them everywhere on campus.  Credit card companies had booths at school fairs and advertisements on classified boards in common rooms.  I even used to find flyers attached to the walls in classrooms.  This type of marketing makes a lot of sense.  College students are usually poor and in need of money, and they are financially inexperienced and unsophisticated.  And when they can’t pay off their credit card debt, one of two things happens.  They either go to their parents for money or they default on their debt.  Defaulting on a credit card can be very expensive.  Upon default, credit card companies raise interest rates, sometimes as high as 30% and charge fees as well.  Small balances can become very large very quickly, so that by the time a student has finished college and begun working they are drowning in debt.

 

Fortunately, recent legislation has been implemented to prevent these types of predatory lending practices.  The CARD Act prevents credit card companies from being allowed to consider the student’s parents income when reviewing applications for credit, unless the parent cosigns the application.  In addition, credit card companies cannot go on campus to solicit college students.  In fact, this legislation states that credit card companies must remain at least 1,000 feet off campus.  But for many recent graduates, this legislation is too late.  Large credit card balances leave them with few options for relief from their debt.

DALLAS BANKRUPTCY: NON-DISCHARGEABLE DEBTS

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Dallas Bankruptcy: Bankruptcy is a great way to get rid of debt.  But there are some debts that cannot be discharged in bankruptcy.  The non-dischargeable debts bankruptcy attorneys generally talk about are taxes, student loans, and domestic support obligations.  These are the most common types of non-dischargable debts, and at least one of the three is found in a large percentage of bankruptcy cases filed.

 

However, these are not the only non-dischargeable debts.  There are several other categories that are much more interesting than taxes and student loans.  The Bankruptcy Code also prevents discharge of debts owed as the result of certain types of wrongdoings.  These include:

 

1.         Criminal Fines.  Fines for violating the law are non-dischargeable.  For example, if you owe court-ordered criminal restitution, have been fined for contempt, or have speeding tickets, these debts will not be discharged in bankruptcy.

 

2.         Fraud.  If you incurred debt through fraud, such as lying on an application in order obtain credit, your debt may be found to be non-dischargeable.

 

3.         Operating a Motor Vehicle While Intoxicated.  Debts for personal injury or death caused by the debtor while driving a vehicle while intoxicated are not dischargeable in bankruptcy.

 

Fortunately, I very rarely file cases in which debtors owe these types of debts.  I would expect that traffic citations would be a common debt included in bankruptcy schedules, but that is not the case.  I guess I have very well-behaved clients.

Texas Bankruptcy Attorney:STRATEGIES FOR COPING WITH CREDIT CARD DEBT

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Dallas Bankruptcy Attorney:

STRATEGIES FOR COPING WITH CREDIT CARD DEBT

Recently I read an excellent article by Laura Coffey on MSN.com discussing strategies for reducing credit card debt.  As a bankruptcy attorney, I meet with clients everyday that are struggling with repaying high interest credit cards, and repaying these types of loans can be an uphill battle.  The average interest rate on credit cards is 14.9 percent, but interest rates of up to 28 percent are not uncommon.  At 28 percent interest a credit card balance is doubling every three years.  For many debtors, this makes repaying their debt nearly impossible.

 

Ms. Coffey suggests the following strategies for reducing personal debt:

 

1. Know how much you owe. Collect each of your bills with outstanding debts including all credit cards, mortgage, student loans, auto loans, personal loans, and bank loans. Create a list of all the creditors with monthly payment amount, balance, interest rate, and credit limit for each. Verify the payment due dates and the status of the account.

 

2. Prioritize which bills to pay first. If you can’t pay off all your monthly bills, first pay the bills that are a necessity for health, shelter, basic groceries and basic transportation. Then pay the secured loans such as your car loan. Payments on unsecured loans, such as most credit cards, should come last in these critical situations.

 

3. Obtain a free copy of your credit report and review it. It may contain an error that is creating a lower credit score that is leading to higher interest rates on your loans. If correcting the error results in a higher credit score, contact your creditors to make sure they know about your improved score.

 

4. Contact your creditors to negotiate lower rates. The less money you pay in interest, the more money you have to pay off your bills. If you are in danger of missing a payment, contact your creditors as soon as you realize you have a problem. They may be willing to work out a payment plan, lower your rate, or lower your monthly payment. Explain that you are in debt, the steps you are taking to repay it, and what you can pay today. If you request a lower interest rate and get turned down, politely ask to speak to the supervisor and ask again. Document all conversations, including whom you spoke with, and the date, time, and the results.

 

5. Pay more than your minimum. Your minimum payment is usually only 2 percent to 5 percent of your balance. At this rate, it will take many years to pay off your debt. In fact, your credit card bill now shows exactly how long it will take. You may be surprised about how much you will pay in interest payments by paying just the minimum payment each month.

 

6. If you have multiple credit cards with outstanding balances, focus on paying off the card with the highest interest rate first. Continue to pay the minimum on your other cards until the card with the highest rate is paid off, and then focus your effort on the card with the next highest interest rate. Keep your oldest credit card accounts open and occasionally use them to buy a magazine or a movie ticket — just pay it off each month. This may help improve your credit score.

 

7. Check into transferring your balance to a card with a lower interest rate. If your rate is above 15 percent, it could pay to transfer the balance for that card to one that offers 0 percent APR for at least 12 months for balance transfers. To take full advantage of this 0 percent interest, pay as much as you can above the monthly minimum. Only use this card for the balance transfer, not additional purchases. Pay attention to the balance transfer fee. At the beginning of 2009, the industry standard for a balance transfer fee was 3 percent; now several issuers have increased that fee to 4 percent.

 

Some people have so much credit card debt that they cannot repay their debt, even following these rules.  For those people, bankruptcy may be a good tool for obtaining relief from their debt.  Not all people are eligible to file bankruptcy, so if you are struggling with repaying your debt you should speak with an experienced attorney.  It’s also a good idea not to wait too long to get advice on bankruptcy.  There are limits on how much debt a person filing Chapter 13 bankruptcy can have at the time they file.  If you wait to file bankruptcy and your debt continues to grow due to interest and fees, you may find that you are no longer eligible for Chapter 7 or Chapter 13 bankruptcy.

(Source:  msn.com)