Look at it as flowers rising from the ashes: despite two-plus years of tough economic times, Americans have managed to significantly lower credit card debt.
The credit card debt of an average family is less than $5,000 - the lowest level in eight years and more than 13 percent less than just last summer, according to the Associated Press. To top it off, more credit cardholders are paying their bills before the due date. It looks like all that coupon clipping and budgeting is slowly paying off - at least for most people. However, some of us are making a dangerous trade-off, say Atlanta bankruptcy attorneys.
Paying down credit card debt is nearly always a smart move. When you're able to lower your balance, you'll also lower the interest you owe - and potentially save yourself years of payments. So when is lowering debt not the best idea? When you're using money that normally goes to the mortgage payment to make your credit card bills.
It appears that some homeowners are lowering debt by skipping out on their house payment. Sadly, the benefits of having less debt will be canceled out by the inconvenience of losing their house - not to mention all the equity they've paid into it. While many homeowners mistakenly believe they can get away without making payments - at least for awhile - lenders aren't stupid. If you break your mortgage contract, you'll eventually be expected to make the late payments plus penalties - or watch the bank foreclose upon your house.
So what should you do if you only have enough to pay one of your obligations - the credit card bill or the mortgage? With Chapter 13 bankruptcy, you still might be able to pay both. Filing for Chapter 13 enacts the automatic stay, a legal action that stops foreclosure and protects your house. In the meantime, you'll be able to work out a payment plan that takes into account your individual income and needs, so you can lower debt and get back in control of your finances. Interested in finding out more about bankruptcy? Contact our Atlanta bankruptcy attorneys for a free personalized debt analysis.
Of course, bank programs are still far from perfect. Their biggest shortcoming? As opposed to Uncle Sam, lenders aren't trying to help homeowners - they are trying to help themselves. They're in the business of providing mortgages, not owning homes - and all those loan defaults are hurting their credit ratings. That means that they're only interested in helping a certain kind of customer - the kind in the situation to pay them back. In other words, they're looking for low debt-to-income ratios.
If too much debt is making it hard to pay the bills, your lender might give you the run-around when you try to modify. Fortunately, you have an alternative. For decades, Chapter 13 bankruptcy has been offering struggling homeowners a way to both protect their home from foreclosure and pay down debt affordably. Interested in learning more about bankruptcy? It's free when you sign up for a one-on-one debt analysis with an Atlanta bankruptcy attorney.
