Things to Consider With Credit Cards After Bankruptcy Discharge

credit cards after bankruptcy discharge

credit cards after bankruptcy dischargeAre you considering getting credit cards after bankruptcy discharge? Your bankruptcy court date has come and gone, and your bankruptcy is complete. Now, you are ready to start rebuilding your credit. There are some things that you want to carefully think out, however, to be sure that you do not get back into the dire financial situation that you just got out of. What do you need to consider?

How Are You Going to Use the Credit Card?

Are you going to use it for products that you normally buy with a debit card or with cash? This is the smart way to think about your credit card usage, as you are buying what you normally purchase, rather than buying things that you cannot afford. Convenience is another reason for credit use, as some things need to be purchased online, such as airplane tickets, booking a hotel, etc.

Evaluate Why You Went Bankrupt

Bankruptcy can be filed for many different reasons. Many times, people choose bankruptcy because their finances became uncontrollable due to medical bills, divorce, or extended unemployment. Credit cards may become the “go to” way to make ends meet, which can cause even more financial stress. A way to protect against this happening again is to have at least 2 month’s salary saved before you get a credit card. Then you want to pay off the balance every month for at least a year to build a good credit rating. If you can meet these goals, then you are ready for a credit card.

If, however, your bankruptcy was due to bad decisions and poor habits in dealing with your finances, you may want to hold off on a credit card to be sure that you have truly changed your ways. If you are able to take some personal responsibility for the bankruptcy, then you could be on your way to being ready for a credit card.

What Do You Need to Look for In a Credit Card?

When you are ready to start looking for a credit card to apply for, be sure that you evaluate the choices that are out there. While you may not be able to get the lowest interest rate, you should be able to get one that does not have an annual fee – if you are willing to look for one. Make sure as well that it is a major bank card that you can use anywhere, rather than a store card.

Credit cards after bankruptcy discharge can help you to rebuild your credit rating to ensure that you will be able to make bigger purchases, such as a home or car, in the future without having to overpay.

Why Store Credit Is Not Always the Right Answer

store credit

store credit

The holidays are right around the corner and the stores have already started promotions to get customers to sign up for store credit cards. In most cases, stores will allow you to receive a discount if you sign up to get a credit card. This may sound very tempting, but when you consider the situation properly, you may not want to get the card. If you do get it, you may decide to never use it. Here are some things to consider when you are thinking about getting the card.

Many Store Cards Have No Grace Period

Credit cards generally give people 30 days, or until the beginning of the next period, to repay the debt before interest starts accruing. Store credit cards do not offer these kinds of protections. Instead, you will start accruing interest the moment you purchase the item. This means that any purchase automatically becomes more expensive because you are adding interest to the purchase.

Store Cards Carry a High Percentage Rate

Credit cards are interested in maintaining your business for every kind of purchase under the sun. As such, you may be facing APR rates of between 6 and 16 percent. When looking at a store credit card, the APR tends to be much higher. It is not uncommon to have a store card with an APR of 25 percent or higher. Keep this in mind as you are mulling over the 10% discount that comes with your initial purchase.

Applying for New Credit Can Make Your Credit Score Go Down

If you are struggling to increase or maintain a good credit rating, signing up for a store credit card may be counterproductive. This is because when you apply for credit, it will show up as a ding on your credit. If you apply for multiple cards at multiple stores, you may see a significant drop in your credit score. This is an important consideration if you already have a low credit score.

Keep all this in mind when you are at the register and the cashier is asking you to sign up for a store credit card. It may not be worth the trouble it will cause you.

Credit Card Debt Drops to Lowest Level in Two Decades

New Credit Card

New Credit CardCredit cards are among the financial instruments analysts look at when estimating the strength of the economy. By looking at these rates, it is easy to say that the economy is starting to look a lot better. Past due credit card payments have fallen to 0.57%. This is the lowest point this has been since 1994. Even the delinquency rate, a normally much higher level, has been declining from 0.69% in the first three months of the year to 0.63% the last three months.

Every section of credit card debt is in decline to show people are being more responsible with their debt decisions. This is in keeping with the decline in bankruptcy rates that have been reported recently. People are carrying lower balances as a result of going to credit counseling during a bankruptcy, or by knowing others who have been through a bankruptcy. No one wants to risk losing their credit cards or their credit behind being late.

The employment rate may have something to do with the ability to pay credit card bills as well. This is because the employment rates have risen with 192,000 new jobs added this month and more expected to follow. The unemployment level is at a 4.5 year low at 7.4% in July, which is down from 7.6% in June. Keep in mind that a healthy economy has a 5-6% unemployment rate, so the economy is not yet at what many would consider to be healthy.

There has also been a rise in new credit cards issued. This is a good sign that more borrowers have the credit worthiness to qualify to get the credit cards. It is also a good sign that there is the possibility that more people will be able to make better decisions with these new credit cards.

Changes to Hawaii Laws on Credit Card Debt

Credit Card Debt

Credit Card DebtHow has Hawaii law on credit card debt changed? And what changes are on the horizon?

Hawaii Garnishment Laws

Hawaii prohibits the garnishment of unemployment benefits, Social Security disability income, Social Security retirement benefits and pension payments to civil employees. Hawaii does not permit the garnishment of life insurance proceeds or disability benefits.

The living expenses, dependent allowances and wage thresholds for bankruptcy filing changed in April of 2013. Contact a bankruptcy attorney to have your garnishments modified to reflect the higher cost of living allowances now in effect.

Statute of Limitations

Hawaii has a six year statute of limitations on almost every type of account, from an open ended account to debt covered by a written contract, which typically includes credit card debt. The statute of limitations is part of Hawaii Revised Statutes Section 657-1. The statute of limitations in Hawaii has not changed, but stronger consumer protection laws are in effect to prevent the re-aging of debt on one’s credit card in an effort to get around the statute of limitations.

Bankruptcy Filing Changes

Federal law limits garnishments to 25% of the debtor’s disposable income. However, the median income, cost of living and discretionary income calculations for a federal bankruptcy filing have all changed and went into effect in April of 2013. Hawaii also limits garnishments to the amount above which someone makes thirty times the minimum wage. If you live in Hawaii and are considering filing a federal bankruptcy petition, contact an attorney to determine whether or not you qualify for a liquidation bankruptcy or debt-repayment plan.

Changes on the Horizon

Hawaii is one of eighteen states considering banning surcharges on credit cards. While this would not affect outstanding credit card debt, it would be a relief to consumers still using the cards. The proposed changes would not affect insufficient fund fees, cash advance fees, late fees or over the limit fees.

The surcharge legislation is in addition to the Hawaii Attorney General David Louie suing several major credit card companies for selling products like payment protection plans and extended warranties. If his class action suit on behalf of credit card holders in Hawaii succeeds, those with credit card debt could see their balance reduced by the amount they were charged for ancillary services.

States begin suing major banks like Chase over faulty credit card debt collection cases

As recently reported in this New York Times article, the attorney general of the State of California recently sued JP Morgan Chase for its shoddy practices in suing consumers on their credit card debt.  Many of the same shady tactics found at the root of the foreclosure crisis are being discovered in thousands of credit card collection cases filed by Chase.  Further, the Office of the Comptroller of Currency is reportedly investigating Chase over the way it collects credit card debt.

Although many times banks such as Chase are unable to produce the documents required to prove indebtedness of the consumer, they often flout the legal process and use hastily created summaries to file their suits.  The vast majority of such suits result in default judgments when consumers are unable to afford representation, unsure of how to handle the lawsuit, or unclear on the legal procedures necessary to defend against such a case.

If you have received a complaint for collection on a credit card debt and are unsure what to do, please contact us to set up a free consultation.

State Pension Fund $8.4 Billion Short

If you’re like us, you hope to retire some day and you worry about how to make that happen.  Today, the Honolulu Star Advertiser’s leading article reports that the state’s largest public pension fund, Employees’ Retirement System (ERS), “is in its worst shape since at least 1980 with an $8.4 billion shortfall.”  However, the state does expect to have the program properly funded 30 years from now if the following conditions: current and new employees must contribute more, the portfolio must average an annual return of at least 7.75%, and people must not live longer than 83 years of age.  These seem like some pretty unlikely conditions to us.

This unwelcome news reminds us of a frequent story we hear from our clients about how they have exhausted all their retirement savings in an attempt to prevent a foreclosure, pay off onerous medical bills, or satisfy aggressive collection agencies.  We wish these clients had come to see us sooner!

Under bankruptcy law, there are exemptions that allow you to protect certain types of your retirement savings while still benefitting from the protections you are legally entitled to receive.  What this means is that it is possible to benefit from a bankruptcy filing without losing all of your hard-earned and carefully saved retirement money.

If you are contemplating emptying your retirement accounts to pay bills, please give us a call first and we will be more than happy to sit down with you for a free consultation to discuss your options.

I’m Getting a Tax Refund, How Should I Use It?

USA Today reported in April 2012 that more than 200,000 American households were expected to use a portion of their 2011 tax refund checks to pay for bankruptcy filings.  Although we have not yet seen any projections for this coming tax season, we expect to see a similar result in 2013.

As you receive your tax refunds and make plans for using it to pay down your debts, we encourage you to check in with Abelmann Law and come in for a free consultation before you take any action.  We can assist you in analyzing the best strategy; you have many options other than just using the money to fill what may seem like a bottomless pit.

Bankruptcy Filings Expected to Increase in 2013

Simply put, rising consumer confidence is leading to households opening their wallets and increasing their credit card and auto loan debt burdens.  This, combined with the expected housing foreclosure pick up, has caused forecasters to predict an 8% increase in bankruptcy filings in 2013.  The following is from usblawg.com:

“Judge Julia Gibbons, chair of the budget committee of the Judicial Conference of the United States, which oversees the federal court system, told a Congressional committee earlier this year that court administrators expect bankruptcy filing to increase by 8 percent or more in 2013.

The court administrators’ projections assume consumer debt levels will start to climb again, resulting in more bankruptcies. Consumer spending increased by 3.3 percent in 2011 after a decline in 2010, according to data released by the U.S. Bureau of Labor Statistics in September. Stronger economic growth forecast for 2013 by Moody’s Analytics, an independent provider of economic forecasting, could make people feel more comfortable about opening their wallets and about taking on new debt.

If housing foreclosures pick up next year with the recovering housing market, then consumer bankruptcies will increase at an even faster pace in 2013, Gibbons predicted.”

Average Credit Card Debt Rises for Hawaiians in May

According to data compiled by Creditkarma.com, Hawaiian consumers’ credit card debt rose in May to an average of $7,250.  (Article here) This is an increase on April’s total and is the second highest total in the nation.   Additionally, Hawaii’s upward trend in credit card debt is running against the national downward trend.  Average credit scores in Hawaii also declined from April.

During these tough economic times, many residents of our beautiful islands continue to struggle to make ends meet.  If you are stressed out about rising debt, then please contact us.   We offer a free consultation and will be happy to sit down in a comfortable, pressure-free environment to discuss your options and come up with a plan to get you back on your feet.

All Walks of Life

April 6 brought news that former NFL star defensive lineman Warren Sapp has filed for Chapter 7 bankruptcy protection.  This serves as a good reminder that, contrary to what many of us may have thought, the individuals and families that file for bankruptcy protection come from all walks of life and file for all varieties of reasons, including, illness, death in the family, and accidents.   The protection and the fresh start afforded by bankruptcy allows many people the chance to catch their breath, get back on their feet,  then return to pursuing their financial goals.  You may have heard of the following people who filed for bankruptcy protection:

  • Abraham Lincoln
  • Henry Ford
  • Walt Disney

If you’re stressed out and losing sleep over whether bankruptcy is the right decision for you, then please give us a call at Abelmann Law to schedule a free consultation.  We will sit down with you to discuss your current situation and help you to decide whether Debt Settlement, Chapter 7 bankruptcy or Chapter 13 bankruptcy is a good option.