Michael D. Hart, P.C.

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The root causes of credit card debt

| Dec 21, 2018 | Chapter 13 Bankruptcy |

As a whole, U.S. consumers have accumulated nearly $1 trillion in outstanding credit card debt. One of the reasons why credit cards can be so appealing is that they allow individuals access to capital beyond what they earn. However, doing so can cause a person to go into debt. Ideally, a Virginia resident will use credit cards for occasional purchases until the next payday.

Individuals also use credit cards because they come with perks. For instance, a cardholder may be entitled to cash back or airline miles as a result of using a given card. However, the interest paid on a revolving balance could be more than what a person receives in cash back or other rewards earned. Generally speaking, the cards are only worth using if one can pay down the balance each month and dodge paying interest.

Cardholders may choose to make monthly minimum payments to avoid paying fees or other penalties. What many may not realize is that failing to pay more than the minimum keeps one in a cycle of debt. This is because it can take years to pay down a balance making only the minimum payment. If one has multiple cards, it can become more difficult to manage the payments. This can in turn lead to late fees.

Those who are struggling to repay credit card or other debt may want to consider filing for Chapter 13 bankruptcy protection. In such a scenario, individuals can repay debts over a period of three or five years. At the end of the repayment period, it may be possible to have the remaining debt balances discharged. Those who file for bankruptcy could also enjoy a reprieve from credit contact or debt collection activities.