Chicago Bankruptcy Lawyer Blog

Credit card issuers are increasingly trying to lure customers back with rewards cards, reports The Chicago Tribune.

But while the cards may come with perks, they don't come with the greatest interest rates. And as our Chicago bankruptcy lawyers point out, that can lead to trouble for Illinois consumers.

Credit card companies mailed out 37 percent more offers last year than in 2010. Most of those solicitations were sent to people with the highest credit ratings.

The Tribune article looks at the best rewards cards for Illinois students, who are typically excluded from offers because of either their lack of credit history or large amount of debt.

But maybe it's a good thing that it's more difficult for young people to qualify for a good rewards card.

While the cards may seem like a boon for customers, they're really just a marketing tactic for banks, who are looking for new ways to sign up cardholders after several years of tightening credit.

Most rewards cards offer 1 percent back on purchases, while the very best cards offer 5 percent back for specific categories like gas and groceries.

For consumers who pay their balance off in full each month, it's a nice little discount - assuming you're buying things you would have purchased anyway.

But in the real world, many people don't pay their balances in full.

For young people struggling with student loans and low-paying jobs, it can be especially tempting to carry a balance. All it takes is one late payment and rewards can easily be whittled away by fees, leaving a high interest rate and no benefits.

Chicago consumers are better off finding the card with the lowest rate, not the best rewards - no matter how appealing those rewards may seem. And if spending is out of line with income, consumers are always better off using cash and paying down existing credit card debt. Chicago bankruptcy can help.

The longer young borrowers wait to deal with their credit card spending, the harder it will be to climb out from under the pile of debt. Filing for bankruptcy in Chicago is a guaranteed way to legally relieve unsecured debt, paving the way for a brighter financial future.

Continue reading "New Rewards Cards Tempt Consumers into More Credit Card Debt in Chicago" »

Personal loans all but disappeared during the recession, but it looks like they're making a comeback.

The Wall Street Journal reports that lenders like Wells Fargo and Discover Financial Services are signing Chicago consumers up for personal unsecured loans to cover expenses like home repair projects, weddings, and paying down debt.

Bank customers received 425 million mail offers for personal loans in 2011 - that's up from just 290 million sent in 2010. Banks know that with falling housing prices and tighter credit, fewer consumers will seek - or qualify for - home equity loans. But they can make money off consumers with smaller loans.

With income stagnant and costs rising, many consumers have been relying on credit cards to make large purchases - or even to pay basic bills - in recent years.

For some, personal loans offer a way to pay down credit card debt and regain control over finances. For others, Chicago bankruptcy may be a more realistic solution.

On one hand, personal loans tend to come with lower interest rates than credit cards. While many credit cards charge upwards of 25 percent, most borrowers will pay 9 to 15 percent on a personal loan.

That difference in interest could make the loan worth it - if consumers stop putting charges on their credit cards.

Unfortunately, Chicago bankruptcy lawyers have seen many people continue to add to credit after securing a loan that is supposed to pay down debt. For folks used to relying on credit as a supplemental income source, it can be difficult to suddenly stop spending beyond their means.

As a result, many borrowers end up with yet another monthly payment on top of a burden of debt.

Every financial situation - just like every consumer - is different. If consolidating debt allows you to pay your balance off faster and more easily than making credit card payments, it's something to consider. But for most consumers, debt problems run deeper than the credit card balance itself.

Consolidating debt just shifts it around. Filing for bankruptcy has the ability to attack the core of your debt troubles by eliminating unsecured debts.

Continue reading "Banks Pushing Debt Consolidation, But Chicago Bankruptcy May Be Better Solution" »

It's hard to fix a problem when you haven't identified what's causing it in the first place. Debt is no exception.

A recent article on Bankrate.com lists the top causes of consumer debt. The good news is that some of the culprits - such as financial illiteracy and poor money management - can be remedied easily enough with education.

But as Chicago bankruptcy lawyers know, many people fall into debt because of circumstances mostly out of our control. These common causes include reduced income, unemployment, medical expenses, and divorce.

Depending on the root cause of debt, there may be different options for finding relief.

Income Causes

Thanks to a stumbling economy, a growing number of Chicago residents have been coping with a reduced or nonexistent paycheck for months.

One of the biggest problems with underemployment is that, initially, many of us look at the issue as temporary. Rather than get our spending in line with our newly lowered income, we may continue spending as usual with the help of credit cards. As our balance mounts with the accumulation of interest, we end up not only with a pay reduction - but with the burden of a pile of debt.

When income is finally increased - whether it's by working more hours or finding a new position - paying down debt requires sticking to a tighter budget than before.

Filing for bankruptcy may be a viable solution for those short on cash. Unlike Chapter 13, Chapter 7 bankruptcy doesn't require a payment plan. In fact, many Chicago bankruptcy attorney clients have seen their unsecured debts discharged entirely.

Unforeseen Costs

Nobody plans to become ill or go through a divorce - but these trials are an unfortunate part of life. They also happen to be expensive, financially and emotionally.

Legal and medical bills add up fast. Making the situation worse, most of us already have credit card debt, and perhaps a mortgage, to contend with. Increasingly, hospitals and doctors are taking credit card payments, leaving many people with balances that are instantly tens of thousands of dollars higher.

While there's no preventing unforeseen costs, becoming educated about your health insurance policy - and making adjustments to coverage gaps and other details if necessary - may help.

Legal and medical fees can leave debtors feeling helpless, and seeking assistance from financial advisors or debt consolidation companies can just make the problem worse.

Bankruptcy was created specifically to help people resolve overwhelming bills. With the legal protection offered by a Chicago bankruptcy filing, many people have been able to get back on their feet and in control of their bank account.

Denial

While denial isn't technically a cause of debt, it's what allows so many people to stay imprisoned by it.

For some of us, denial means waiting on a financial windfall, like a job bonus or inheritance, that never comes through. For others, it means avoiding the little number on our credit card bill that tells us just how much we owe - and how many months it will take to pay off our balance.

Examining finances for the causes of debt breaks the cycle of denial so that consumers can identify a solution. A Chicago bankruptcy professional can help determine whether a bankruptcy filing is the right solution for you.

Continue reading "Top Causes of Consumer Debt in Chicago" »

There's a common myth that filing for bankruptcy prevents consumers from qualifying for loans and credit in future. In fact, bankruptcy may be more likely to help your chances than to hurt them.

Many Americans looking to take advantage of today's low mortgage rates are learning that, not only can they not qualify for their desired rate, but they can't qualify for a mortgage at all.

According to the Chicago Tribune, as many as 25 percent of loan applicants - many with good credit scores - are being turned down by lenders. Over the last few years, the average credit score has actually risen to 760 from 720. Consumers are being more careful, yet we're being offered fewer opportunities.

Experts say the reduction in borrowers could have a harmful snowball effect on the economy. As fewer people are able to buy homes, demand will decrease and home prices will continue dropping.

If you've been hesitant to consider bankruptcy because you think it could limit your opportunities, consider this your wakeup call. Opportunities are already limited; bankruptcy can help.

Chicago bankruptcy lawyers have seen many clients wait to seek help until their credit card balance is sky-high and their credit score has hit rock bottom. But the farther you allow yourself to fall, the steeper the climb back up.

For many people with unmanageable mortgage payments, credit card bills, or medical debt, bankruptcy can be a way to stop the financial bleeding before it gets worse - so you can be in a better position to grasp economic opportunities when they do inevitably arise.

Contrary to popular belief, it is possible to qualify for loans and credit cards after a Chicago bankruptcy filing - sometimes in just a few months. Yes, a bankruptcy filing will be noted on your credit report for several years after filing. However, so will everything else that you accomplish during that time.

If Chicago bankruptcy is what it takes to eliminate debt and get back on track, the rewards of filing probably outweigh the risks.

For consumers who already have a mortgage but are struggling to make payments or qualify for a refinance, Chapter 13 bankruptcy can provide the legal power to stop foreclosure and regain financial control.

The lending market looks like it may get worse before it gets better, according to the Chicago Tribune article. New regulations intended to minimize the kind of risky lending that led to the mortgage crisis could require buyers to cough up down payments of at least 20 percent, essentially pricing all but the wealthy out of the housing market.

Continue reading "Chicago Bankruptcy May Help Potential Borrowers Unable to Qualify for Loans" »

Maybe the best gift you can get your significant other this Valentine's Day is to come clean about your credit card debt and make a commitment to solving the problem together, perhaps with help from Chicago bankruptcy.

Studies have pegged debt right up there with infidelity as one of the top causes of breakups and divorces in the US. But often it's not the debt itself that's the problem.

As many as 80 percent of spouses hide purchases, bank accounts, or credit cards, according to a survey by CESI Debt Solutions.

Chicago bankruptcy lawyers have spoken with many clients who spent years hiding credit card debt and other money woes from a spouse or partner, ultimately damaging the relationship and allowing their financial troubles to spiral out of control.

It's true that debt causes stress, and stress can take a toll on your relationship. But hiding debt causes something worse: communication breakdown.

Spouses who hide the severity of their debt frequently suffer from depression and other health issues due to the anxiety of bearing their burden alone. The spouse kept in the dark often becomes suspicious and untrusting, and - when the debt is exposed - feels angry, resentful, and betrayed.

In most states, both people in a marriage suffer a reduced credit score and are considered liable for debt, even if one partner is mainly responsible.

There's truth to the old saying that two heads are better than one. Not only can working together with your partner help you come up with a more rational solution for dealing with debt, but it can also keep you on the same page, reducing feelings of helplessness or resentment.

Of course, it's unrealistic to assume that simply talking about finances will make relationship stress disappear. But being open is a start.

Most financial advice for couples is limited to tips on saving money for a house or how to separate bank accounts. But what happens when just rearranging the budget isn't enough to pay the bills and pay down debt?

Often times, bankruptcy can provide the most realistic solution when debt has become unmanageable. With a Chapter 7 or Chapter 13 bankruptcy, most or all of a couple's unsecured credit card debt can be eliminated, saving years of accumulating interest - and a lot of stress.

In the meantime, here are a few tips from CNNMoney on how to maintain your relationship while battling debt.

Have the Money Talk Early On

Ideally, take some time before you get married to sit down and talk about where you stand financially and how you intend to handle finances together. A relationship can survive without perfect finances (for instance, you may decide to eliminate debt with a tighter budget or bankruptcy) but it can be very difficult if partners aren't financially compatible to begin with. It's a good idea to find out whether you share financial priorities before your finances become legally tied.

Look for Red Flags

Does your spouse only pay with a credit card? Have you noticed a lot of new bills sitting around the house - some for purchases you didn't know about? Or perhaps you haven't noticed any bills because your partner has been squirreling them away? When you attempt to talk to your significant other about money, do they seem resistant - or even angry? You may need to get to the root of a financial problem - and seek financial help together.

Go Over Your Finances As a Couple

Make a point to get periodic credit reports (you're legally allowed one free annual credit report from each credit bureau) and go over them together. It may not be realistic to share every nickel and dime you spend, but couples should at least have a basic understanding of how much is being spent and saved by each party.

Continue reading "Credit Card Debt Takes Toll on Relationships of Chicago Couples" »

Homeowners shouldn't be surprised if they find a foreclosure notice in the mail after defaulting on their mortgage payments. But what if the bank began foreclosure proceedings for a loan you knew was already paid off?

More and more frequently, Chicago bankruptcy lawyers are seeing ghost mortgages coming back to haunt borrowers.

In a recent Reuters article, a Kansas couple refinanced their home to take advantage of lower rates. But while Wells Fargo said the original loan would be paid off in the refinance, it was never recorded in the paperwork.

As a result, the family was thrown into foreclosure - despite the fact that they had never made a late payment.

Experts attribute the problem to sloppy paperwork during the housing boom, when lenders attempted to sell as many loans as possible so they could resell to millions of investors. Now banks are using the same sloppy tactics to foreclose on as many homes as possible with reckless speed.

Some of the borrowers being pushed into foreclosure were never in default; others never even had a mortgage. Often times, a computerized banking error is the source of the mix-up.

It's a good reminder of why it's so important to keep tabs on the state of your credit. Banks report any late or missing payments - whether valid or not - to credit bureaus, who in turn record the discrepancies in your credit report. Having a credit score tarnished by a delinquent mortgage or a foreclosure you didn't know about can keep you from getting future loans or lower interest rates.

Of course, the majority of folks facing foreclosure are still those who have missed one or more payments, usually because of job loss or overwhelming credit card debt.

Regardless of how you've gotten into a mess with the bank, filing for bankruptcy in Chicago is often the best way out.

Chapter 13 bankruptcy has the power to stop foreclosure proceedings from the moment you file, so you can protect your house and stop the bleeding on your credit report.

Whether you're unfairly caught up in a foreclosure or are losing your house because you couldn't afford to make payments, the effects can ruin credit, put you at risk for costly lawsuits, and, of course, threaten to snatch the roof from over your head.

Bankruptcy can put a fast stop to foreclosure, so you can start rebuilding your finances, you credit, and your life.

Continue reading "Chicago Bankruptcy May Help Homeowners Haunted by Old Mortgages" »