Mounting credit card debt is common for many consumers in a troubled economy, and this is one of the worst economic periods in decades. Job loss, medical expenses and other factors can force people to borrow above their means and lead them into a financial hole. For a rising number of people, bankruptcy becomes a serious consideration for saving their home and getting a fresh start. The consequences can be severe — bankruptcy CAN affect your credit rating, although almost everyone who files already has a credit rating well below the minimum needed to borrow again. But when faced with the realization that they can no longer pay their bills, many people seek out a credit counselor or bankruptcy attorney.
But before you reach financial Armageddon, a bankruptcy attorney or counselor will put you through a financial checkup to see what, if anything, you can do to improve your situation without filing for bankruptcy.
Among the common problems a bankruptcy attorney will see are people maxing out credit cards and paying interest rates as high as 30 percent. Late payments, which add late fees of $39 or more to your bill, are also common. Another warning sign is using your credit card for basic things like groceries when you may have the cash to pay. Other issues include using balance transfers to pay off one card with another, then charging up the one you paid off, not reviewing credit reports (you can challenge errors), failing to talk to credit card companies to reduce your interest rate, failing to budget within your income, using high-interest retail store cards and prioritizing nonessential bills, such as paying the credit card bill before the mortgage.
If you have the income to budget your finances and pay down your debt, an attorney may advise you or help you to contact your credit card companies and try to negotiate a lower interest rate or settle the debt for less. If successful, be prepared to live on the budget you developed while making payments that are above the minimum with the idea of eventually paying off your debt. But if you can't possibly make even the minimum payments, then considering bankruptcy with a bankruptcy lawyer may be the road to a fresh start.