What To Do?
You get a letter from the credit card company telling you that they are cutting your credit limit to what ever your outstanding balance is. Hold on, they did this a couple of weeks ago and you didn’t know, because of the mail delay. You used the card. Now you are over the limit and being assessed over limit fees. Your interest JUMPS to 29%. Your credit status is dropping and about to fall off a cliff. You call to set the record straight, but they don’t care. You can’t even get to speak with someone who has the smarts or authority to help you. You have never missed a payment. Your minimum payment doubles and it’s just the beginning. It will happen with other cards. Now you can’t afford the new ridiculously high interest rates. You can’t get credit anymore. You did nothing wrong or to set this in motion, so what do you do? See Below.
You are a hard working, moral, ethical person. Parent, spouse with enormous and crucial responsibilities. You have been employed or self employed for 10, 15, 25 years or more, never missed a day and never had a problem paying your bills EVER! A few years ago you hear about Wall Street corruption. This bank — that investor going under to the tune of TENS OF BILLIONS . The stock market in a free fall. Real Estate screeches to a standstill. Then the trickle effect comes at you like a landslide. Your employer can’t keep up sales. Your business suffers as your customers lose income and credit. You did nothing wrong and nothing to create this mess, but you are stuck smack dab in the middle. Your hours are cut, you are laid off or you just can’t generate enough business to pay your bills. The calls begin, and come and come and come. They are brutal and relentless. You need help. You may not like what you face, but Do Not Delay. It will get worse if you don’t learn your options. See Below.
Before we explore some options it is important that you prioritize your spending. Obviously you need to survive, so you have to buy food, pay utilities, insurance, gas for the car and medical needs. Next comes rent or mortgage. Next your car loan / lease. Then and only then do you pay anything to the credit cards and unsecured debt if you have money. Don’t let the collectors convince you otherwise. Don’t let their relentless calls, threats and pressure weaken your resolve to pay the priority expenses first.
This used to be difficult. Credit card companies had no interest in giving you a break. Things are different now. Many credit card companies will settle. Some for reduced interest rates and lower monthly payments. This is good for people who don’t have access to lump sums of money to settle in full.
Many credit card companies will settle for lump sum payments of 50%, 30% or less of the outstanding balance on the account. I know of one case where the Credit card company settled for 15% on a $50,000.00 balance. The obvious trick with this option is coming up with a lump sum amount to settle. There is one more caveat. This is often considered debt forgiveness. The amount of debt forgiven is considered income and is taxable. If you qualify to file for a Bankruptcy discharge, that may be a better option since you will pay no balance back and there is no tax on the balances discharged.
Please note that even though credit card companies are settling many accounts like this, it’s not a simple as just calling and working out a deal. If you are current on your payments, they usually will not talk settlement. They get serious when you start getting 2, 3 or more months past due. The more past due, the better the deal in many cases. You need a complete review of your financial position to determine what is best and available for you. Then you need to prepare and commit to going through with it to the end. Call 203-816-6662 for more information or to schedule a review of your financial position.
Almost no one wants to file bankruptcy. But bankruptcy can be a life saver. You need to give this option strong consideration. With some exceptions, it will free you of most or all of your debt. It doesn’t necessarily mean you will lose you home or car (most people don’t). However, if you retain secured assets, you will need to continue to pay those debts.
Depending on your current credit status (or if your status is about to take a downturn), bankruptcy may not make things worse. You may not be able to get credit now anyway. Yes it is on your credit report for 7 – 10 years, but so are your late payments, judgments and other items.
Call 203-816-6662 for more information on bankruptcy as an option or to schedule a review of your financial position. Click here for more information on Bankruptcy.
Key Provisions of Credit Card Accountability Responsibility and Disclosure Act of 2009
(Provisions will be effective on February 22, 2010, unless otherwise noted.)
- Provides Enhanced Disclosure of Card Terms and Conditions
- Requires issuers to provide cardholders with 45 days notice of annual percentage rate, and other significant changes (Effective August 20, 2009);
- Requires issuers to disclose changes in card terms that take effect upon renewal;
- Requires issuers to disclose the period of time and total interest that will be paid if a consumer repays a card balance by making only the minimum monthly payment;
- Requires full disclosure in billing statements of payment due dates and late payment penalties; and Prohibits the use of the term “fixed rate” unless the APR or interest rate will not vary for any reason over the period specified.
- Requires Fairness in the Timing and Application of Card Payments
- Requires credit card statements to be mailed 21 days before the bill is due rather than the current 14 days to treat a payment as late or deny a grace period otherwise offered (Effective August 20, 2009); Prohibits issuers from setting early morning deadlines for credit card payments;
- Requires that credit card payment due dates be the same day each month;
- Requires that payment at local branches be credited on the same-day; and
- Except for deferred interest balances, requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest.
- Fosters Responsible Lending
- Requires issuers to consider a consumer’s ability to pay when issuing credit cards or increasing credit limits.
- Restricts Certain Fees and Interest Charges
- Prohibits issuers from charging a fee to pay a credit card debt by mail, telephone, or electronic transfer, except for live services to make expedited payments;
- Prohibits issuers from charging over-limit fees unless cardholder has agreed to allow the issuer to complete over-limit transactions and restricts the manner in which over-limit fees may be assessed;
- Requires penalty fees to be reasonable and proportional to the omission or violation
- (Effective August 22, 2010);
- Prohibits applying excessive fees to the credit available on low-credit, high-fee credit cards; and
- Prohibits interest charges on debt paid on time (prohibits “double-cycle billing” and requires that when grace periods are offered, they must extend to partial payments ).
- Prevents Unfair Increases in Interest Rates and Changes in Terms
- Prohibits APR, fee, or finance charge increases during the first year an account is opened and subsequently on outstanding balances subject to limited exceptions that do not permit “universal default” or “any time/any reason” repricing;
- Requires a credit card issuer who increases a cardholder’s interest rate to periodically review and decrease the rate if indicated by the review (Effective August 22, 2010); and
- Requires promotional rates to generally last at least 6 months.
- Strengthens Oversight of Credit Card Industry Practices
- Requires Federal Trade Commission to issue rules that prevent deceptive marketing of free credit reports; and
- Requires credit card issuers to post credit card agreements on the Internet and provide those agreements to the Federal Reserve Board to post on its website.
- Enacts Safeguards for Young People Who Obtain Credit Cards
- Requires issuers extending credit to consumers under the age of 21 to obtain the signature of an individual 21 years or older who will take responsibility for the debt or proof that the applicant has an independent means of repaying any credit extended;
- Limits prescreened offers of credit to young consumers;
- Prohibits increasing a credit limit unless both the cardholder and other jointly liable individual agrees to the increase; and
- Increases protections for students against inducements to obtain a credit card, and increases transparency of affinity arrangements between credit card companies and universities.
- Enhanced Penalties
- Increases existing penalties for companies that violate the Truth in Lending Act for credit card customers.
- Gift Card Protections (Effective August 22, 2010)
- Requires certain gift cards to have at least a five-year life span; and
- Eliminates the practice of declining values and hidden fees for gift cards not used within a reasonable period of time.