Chicago Bankruptcy Lawyer Blog

A recent Forbes article reports helps consumers figure out how to obtain a credit card, opining that lenders are being more strict with who gets one of their shiny pieces of plastic.

But according to creditcards.com, there are more than 400 million credit cards in circulation in the United States and industry experts believe that companies are sending out offers at record levels.

Many people believe that the amount of credit available in the United States has actually increased, which has led to a decline in the number of Chicago bankruptcies reported in 2011.

Typically, in times of tighter credit, more people are willing to consult with a Chicago bankruptcy lawyer and go through with the process than when more credit is available. That's simply because when more credit is available, people will take it, especially if they are in a financial bind.

But this isn't necessarily a good thing. When these credit companies extend offers to consumers, it's to make them money, not to actually help the consumer. These companies aren't designed to lend out money with zero return. That's why they pack in hidden fees that crop up when payments are late or if certain requirements aren't met.

Interest rates can spike at any time and the "perks" and "rewards" offered typically require huge amounts of spending so that even if a person gets the perks, they end up paying for it i the end. It's not really a perk, after all.

The Forbes article goes on to say that a 720 credit score used to be considered good, but the author believes that credit card companies are considering 750 an "excellent" score. The analysts in the article believe that credit card companies are being more conservative.

But that mainly applies to simply handing out premier interest rates. Anyone can get a credit card and fall into the traps set by card companies. Other news media have reported that there are record numbers of credit card offers being mailed out daily.

Some tips for consumers searching for a credit card:

Payment history is key
Experts believe that people who have a long history of paying their cards on time will likely be able to obtain new cards.

Credit length, diversity is important
Credit diversity means holding different types of loans -- car, home, credit card, store credit. Length of credit simply means showing that you can make payments for years.

Debt-to-credit ratio
Credit card companies don't like to see that a consumer uses one card exclusively and has little on others. They would prefer to see your debt stretched out.

Students who have never owned a credit card before and those under 21 have had difficulty obtaining credit cards since the passage of the CARD Act in 2009. Under the act, they must have co-signers unless they have enough assets or income to obtain a waiver.

Some who get rejected for cards might consider going to a bank and starting a checking account and later seeking a credit card through their bank. There are options, but consumers must be careful. While credit card companies seem to be showing some restraint as far as who they provide cards to, they still want to maximize their business and get as many cards out there as possible. The more cards, the more profit. And that means the more trouble for consumers.

Continue reading "Media Offers Advice On How To Get a Credit Card, But Not the Debt that Follows" »

A recent Forbes.com article lays out how a person could go about getting a credit card even when he or she has no credit established.

The article seems to be aimed at college students or immigrants who have never obtained credit before. But what it fails to reveal is that credit card companies have traps -- hidden fees, late payment fees, high interest rates and other built-in policies that can ensnare inexperienced consumers.

This can lead to debt problems that can be difficult to repair. Damaged credit in Chicago is a difficult thing to fix because after years of minimum payments and high interest rates, the amount of debt just keeps piling up and credit scores keep plummeting.

Chicago bankruptcy lawyers have seen how credit card companies through the years have hammered their customers with fees and penalties that lead them deeper and deeper into debt. Obviously, credit plays a large part in the nation's economy. Without it, people wouldn't be able to buy houses and cars, or start businesses. But it can also be very dangerous.

For many college students, having no credit is a starting spot to getting credit. They are getting by on minimal income and need to be able to qualify for renting apartments and making purchases that are more expensive than the cash in their bank accounts.

Credit card companies have hired smart marketing people who try to appeal to college students. They offer "perks" and can sometimes get universities and colleges to team up with them so that spending money gives them credits at book stores or campus restaurants. They try hard to appeal to college students, who don't understand the problems that can linger if credit card habits get out of hand.

Forbes offers some tips to college students who are looking to get their first credit card:

-Make sure the credit card actually reports credit. There are prepaid cards that are attractive to students who don't want to get trapped with credit damage, but they may not report credit, which don't help your credit score. Other cards charge fees, but will help a person establish credit.

-Some cards offer perks such as a small percentage of cash back for paying a bill on time, an incentive that can lead to improved credit scores.

-Getting a co-signer will also help your credit, but it puts the co-signer, sometimes a relative, on the hook if your mess-up. Your poor credit can affect their credit.

Credit cards can be helpful for college students and young consumers who want to try to build their credit, but if not harnessed, they can lead to poor credit in a hurry. Even a person who has spent years of building up strong credit scores can have those toppled when late fees and hidden fees start getting reported by the credit card companies to the credit agencies.

They must be used cautiously and consumers must do their homework when deciding which card to choose. Find out about the different types of fees, how much they are, when they're assessed, and what happens to interest rates if a payment is made late.

Continue reading "Even Mainstream Media Encourage Chicago Consumers to Get Tangled in Credit Cards" »

Recently, the Federal Reserve laid out a not-so-heralded plan to boost the economy by driving down long-term interest rates in order to stimulate the economy.

But the plan only works if borrowers take out loans now, which sends them into debt. Even with low interest rates, this situation can be a challenge to overcome. In fact, investors didn't respond well to the plan, with the stock market largely in a sell-off in the days after the announcement was made.

Let's be clear here, though -- credit is a necessary function of our society. Most people don't have $15,000 to $20,000 to buy a new car. And very, very few people have $150,000 in cash to purchase a new home. So, it's obvious that banks and lenders are needed in order for our society to function.

However, what usually happens is that people are forced into bankruptcy in Chicago because of the lenders' hidden fees and ridiculously high interest rates. This can leave a borrower actually paying a lot more than what the item or service is worth. Chicago bankruptcy attorneys have seen time and time again many consumers who have been taken advantage of by lenders.

While low interest rates are beneficial to those who must take out loans to make purchases, they can still add up over time.

According to a recent USA Today article, the $400 billion that the Fed shifted may actually have a low impact on consumers. They may end up getting lower rates on mortgages and fixed-rate loans, yet those holding long-term bonds may seen interest income dip as a result.

Because of the nation's high 9.1 percent unemployment rate, the move is unlikely to provide long-term improvement. Some experts say the impact on consumers will be minimal. Here are some areas where consumers may see changes:

Mortgages
Mortgage rates are a focal point of the national bank's plan. The $400 billion in short-term Treasury bonds will be used to buy long-term Treasury bonds by next summer. The money will be reinvested from mortgage-backed securities to help mortgage rates stay low.

Interest rates are already low -- 4.09 percent on a 30-year, fixed mortgage -- so it's not interest rates that are the problem. Consumers are nervous about the housing market and are unwilling to invest.

Consumer Debt
Most people's credit card rates are tied to prime rate, so the Fed's plan could keep credit card rates lower at least until 2013. Yet, some analysts say the prime rate isn't based fully on federal funds, but is also determined by the rates at which banks lend each other money and on the market.

So, if the economy and stock market continue to slump, rates could end up rising.

The article goes on to say that those holding long-term bonds will suffer under the Fed's plan, including retirees hoping to benefit from interest rates later in life. This includes insurance companies, which are heavily invested in bonds. These companies could raise rates to make up for lost income there. Short-term savings and the stock market also will be affected.

Most people hope that the Fed's plan works to help this country get back on track. But most people don't have a strong feeling that it will.

Continue reading "Fed Plan Could Lead Chicago Consumers Into More Debt" »

With many colleges and universities back in session after the summer months, students have a lot to deal with -- which classes to take, with whom to make friends and where to live.

But, as the New York Daily News reports, they must also consider which credit card to get. Many college students get overwhelmed by debt, especially if they're unable to find work. While a credit card can come in handy in tight spots, many students get through years of higher education not only with big student loan bills, but also mounds of credit card debt.

And this credit card debt can lead to a Chicago bankruptcy filing if students aren't careful to avoid the pitfalls of credit cards, such as their short-term low interest rates that balloon over time as well as hidden fees that can make a purchase much more expensive that the sticker price.

Bankruptcy in Chicago can help students who get out of school drowning in debt. After spending four years barely getting by financially, finally earning a degree is quite an accomplishment. But then having creditors hounding for payments and making life miserable all while trying to build a career can negatively impact quality of life. Consulting with an experienced Chicago Bankruptcy Lawyer and considering how bankruptcy will allow you to eliminate most of your debt may be a smart decision in order to free up time to focus on a new career and new life.

The New York Daily News article looks at at several credit cards that are geared toward students and how they may be beneficial to those seeking their first line of credit. Despite the recommendations, it's always buyer beware with credit cards. They are a company looking to make money and they do it by charging their cardholders excessive fees and interest levels in order to maximize profits.

The article's suggested cards:

CapitalOne Journey Credit Card: The article states the card has no annual fee and is designed to help students learn how to build credit. Cardholders get text and email alerts to keep payments on track and the card offers a bonus for paying on time. But for those who carry a monthly balance, be prepared to pay a 19.8 percent APR.

Citi mtvU Platinum Select Credit Card: The card has no annual fee and allows students to earn points for every dollar spent. The points can be redeemed at restaurants, movie theaters, bookstores and music stores. Maintaining a good GPA also allows for bonus points. The initial APR is 0 percent, but it climbs to as high as 22 percent.

Discover Student More Card: This card also has a rewards system and no annual fee. The rewards program allows for 0.25 percent cash back, but based on quarterly rotations, the "bonus" categories can earn 5 percent cash back. Interest rates can climb to 21 percent after a nine-month 0 percent APR period.

Continue reading "College Credit Card Debt in Chicago Can Get Out of Control Without the Right Plan" »

Now that lawmakers have "solved" the debt crisis by adding to it by a few trillion dollars, it may be a good time to take a look at our own finances. Most people don't have the power to add a few trillion dollars to their own debt ceiling, so let's look at some other alternatives.

Forbes.com recently published four tips to working on your personal debt. Credit card debt and other lines of credit have sent people into debt that is often unmanageable.

Filing for bankruptcy in Chicago, however, immediately stops creditors from harassing consumers and allows them a fresh start. But the process is complex and is best handled by an experienced Chicago Bankruptcy Lawyer.

Job loss, unexplained medical bills and predatory lenders are some of the biggest reasons people consider filing for bankruptcy in the first place. So, making sure you are able to climb out of debt is smart. However, it may not work for everyone.

Here are some tips to improve your finances:

Attempt to refinance your debt at a lower interest rate: Interest rates are nearing record lows, so it may be possible to transfer debt from a high rate balance to credit cards with low or even zero interest. Be careful about expiring deals, though.

Other options include borrowing from home equity and retirement plans, but those have pros and cons, too. You're putting your home on the line if you can't pay through home equity loans; while credit checks aren't required for retirement plan loans, you may be in line for a tax hit in the future.

Determine where you're spending and try to cut back: Cuts, cuts, cuts, seems to be the mantra in Washington D.C., but they rarely do it. Take a look at your personal spending over three months of bank and credit card statements. See how much you spend on eating out and entertainment. Try cutting back.

If you believe you're as thin as possible, prioritize spending. Pay house bills, food, utilities and transportation. It's better to be late on a credit card payment than being evicted or having things repossessed. Try to spend less than you take in.

Pay down debt: If you have a little extra left at the end of the month or you get a bonus at work, don't blow it on a fancy dinner or a new dress. Pay toward what you owe and the balance that has the highest interest rate. After one balance is paid off, go to the next.

For those having trouble making minimum payments, creditors may be open to working out a payment plan. However, they sometimes are difficult to work with and Forbes suggests considering bankruptcy.

Stick to a "balanced budget amendment": Track your spending on a monthly basis to determine what you're spending and have the resolve not to go above that. Break up spending into monthly increments and take irregular spending, like vacations and holiday shopping, and break it down into a monthly cost.

Try to save up three to six months of expense dollars in an emergency fund. If there are months where you spend less, put the money aside. And consider giving yourself an allowance that you won't go over for food and shopping.

These are all good tips, but they don't apply to everyone. Many people are hurting and aren't able to take all these steps. For many people, they feel so overwhelmed with debt, they can't comprehend having money left at the end of the month for savings. For these people, filing for bankruptcy in Chicago may be a good option.

Consulting with an experienced Chicago Bankruptcy Lawyer should be your first step if you're in this position. There may be other options besides bankruptcy, but getting sound advice is necessary. Call today.

Continue reading "Tackle Your Chicago Debt Ceiling Without an Act of Congress" »

The Lexington Herald-Leader recently reported about a couple in Kentucky facing $70,000 in federally insured student loans, despite dropping out of school because of family problems and defaulting on the loans.

The couple is now buried and debt, yet haven't filed for bankruptcy. While it's true most student loans cannot be discharged, filing bankruptcy can still help those struggling with such debts. And more help may be on the way to deal with predatory lenders in the student-loan sector.

Lawmakers recently introduced legislation that would allow students to discharge commercial student loans in bankruptcy proceedings, reversing a 2005 law, according to U.S. News & World Report.

Even without the law change, filing for bankruptcy in Chicago is a way to eliminate debt that is causing stress, hardship and frustration. But the first step is consulting with an experienced Chicago Bankruptcy Lawyer who can help explore all options and determine the best avenue for you based on the laws in place.

According to the news report, the national average for a three-year default rate for 2008 is 13.8 percent, according to federal data. Private, for-profit "career colleges" tend to have the highest default rates because of how expensive tuition is compared to the average salary upon graduating.

While it's possible that some student loans can be considered an "undue hardship" and can be discharged, it requires showing a bankruptcy court judge this is the case. If you are able to work, this can be difficult.

But according to U.S. News & World Report, the law may be changing. With college costs rising and the economic climate getting worse, a change to the bankruptcy law would be helpful for many people.

Both bills introduced in the U.S. Senate and U.S. House of Representatives would restore the ability to discharge commercial student loans in bankruptcy proceedings, reversing a 2005 change to the law for borrowers who find themselves unable to make payments on their loans.

"Before changes were made to the bankruptcy code in 2005, only government issued or guaranteed student loans were protected during bankruptcy," said Sen. Dick Durbin, D-Ill., in a press release. "This protection has been in place since 1978 and was intended to safeguard federal investments in higher education. Today's bill would restore the bankruptcy law, as it pertains to private student loans, to the language that was in place before 2005, so that privately issued student loans will once again be dischargeable in bankruptcy."

The law change is particularly crucial in today's economy, where only 56 percent of 2010 graduates were able to find work, according to a study by the John J. Heldrich Center for Workforce Development at Rutgers University.

But even without the law change, if it happens, bankruptcy can be helpful for those struggling with debt that is brought on by student loans. While discharging the student loans can be difficult, filing for bankruptcy can offer the opportunity to eliminate other debt, making it easier to pay back what is owed. Being mired in debt is difficult on anyone and using the laws to protect consumers can provide a fresh start for Chicago families.

Continue reading "Chicago Bankruptcy Can Help Students With Debt Caused By High College Loans" »

Remember when getting a credit card was thrilling and it made you feel like you were getting some new-found freedoms?

Well, now that you're an adult and have seen the destruction these high interest rate cards can cause, you probably don't feel the same way as you did years ago. With the Great Recession mostly behind us, credit card companies are again opening up shop, sending out offers and paying high-profile celebrities to peddle their product.

But should you take the bait? Credit card debt is one of the No. 1 factors for filing bankruptcy in Chicago. They are responsible for people piling up debt that seems never-ending because of high interest rates and hidden fees that ensnare consumers. But there is help and consulting with a Chicago Bankruptcy Lawyer is a good first step.

Data shows that new lines of credit were opened at a 60 percent increase for people with scores below 620 in the first quarter of 2011 compared to 2010, Equifax reports. Banks and credit cards are opening up new lines of credit like they did before the economy crashed, but is that good for you?

The article looks at some tips of how to determine whether or not to jump back into the credit card fray:

• Obtain a credit report so you know what your situation is: Before applying for or accepting credit card offers, see what your score is and repair any errors that may be contained in it. Mistakes can lead to higher interest rates.
• Ask yourself why this is a good idea: Credit cards should be used to show lenders you can handle your card responsibly and repair your credit score. They shouldn't be used for emergencies. A cash fund should be used for that.
• "Preapproved" really just means "prescreened": Preapproval to most companies just is an initial look-see. When you apply, they dig deeper and usually offer higher rates.
• Don't be swayed by the envelope: Flashy signs of free gift cards and perks just for signing up sound great, but read the contract thoroughly. There may be hidden clauses that may make it not worthwhile.
• Be wary of secured credit cards: These work by putting down a deposit and the available credit is based off that. But there can be upfront fees and even charges for customer service.
• Shop around: If one credit card company wants you, others probably do, too. But get the best possible interest rate if you're committed to getting back in the game. Don't be afraid to say no.
• Prepare for the hard sell: Companies will offer services, such as ID theft protection or credit monitoring for "pennies a day," but they may not be worthwhile. You may already have offered protections through insurance policies.
• Consult a non-profit credit counselor: For-profit groups can be a rip-off, but a non-profit group may be able to give you advice about how to handle your debt.

Continue reading "Chicago Credit Card Debt Piles Up, So Should You Get Another Card?" »

Credit cards can seem to be a blessing for someone who is struggling to get by. But as the debt mounts, you may begin making fewer payments, leading to ridiculously high interest rates. That can lead you to consider filing for bankruptcy in Chicago.

But a recent article by a debt expert Andrew Housser explains how people can avoid using credit cards as a crutch that ends up ruining their credit scores.

A Cook County bankruptcy law firm can help you if your credit card debt or other forms of debt have gotten out of control in your life. We can work to help you save your house from foreclosure or choose whether to file for either Chapter 7 or Chapter 13 bankruptcy.

But it's not always necessary to file for bankruptcy. So, consult with a law firm dedicated to helping you protect your assets. According to the article, in recent decades household debt has gone up. From 1968 to today, household debt has increased from about $1.3 billion to $800 billion. But overall revolving household debt is down 17 percent from fall 2008, just before the country's recession.

Over the last few years, you may have been cutting back on debt and trying to get it stabilized only to have it shoot back up. These are some tips to cutting back on credit card debt:

• The first step is to establish a budget and calculate how much you can spend. Live within your means and don't overextend yourself. You may choose to switch to cash only.


• Don't be fooled by credit card company rewards programs. The advertisements and TV commercials are everywhere. Sign up and get this. Use this card and be eligible for that. A recent study by the Federal Reserve Bank of Chicago found that when people sign up for a credit card that offers rewards, their spending increases.


• Borrowing money adds to your debt. Personal or home equity loans don't cancel out your credit card debt.


• Understand and analyze why you got into credit card debt in the first place so you can address your bad habits.


• Don't overspend one time because it may bite you. Just when you make a big purchase, you'll need a new transmission in your vehicle or a major roof repair on your home. It's best to stay strict with your spending.


• It can sometimes be easier to manage a little bit of money rather than worry about what to buy when you have a lot. So, spend as if you have little.


• Make wise decisions about what you "must" have.


• Rebuild credit by paying off your credit card each month. One way is to use a credit card to pay off a regular bill and pay it off quickly.


• Bankruptcy may not be the cure. Once you file once, you have to wait a certain number of years to file again, so don't use it as a crutch.


• Get help if you need it. Sometimes you can talk with credit card banks and work with them to help you.

Continue reading "10 Ways to Avoid Credit Card Debt in Chicago" »

This year's average tax refund is more than $3,000 - but there may be a way to stretch it even farther.

With gas and grocery prices going up, it would be easy to allow that money to simply disappear, say Chicago bankruptcy attorneys. A couple bills here, a little shopping splurge there, some unexpected car repairs, and - poof - your bank account is back to where it was before. But there's a way to keep your refund alive long after you deposit it. How? By putting it to work for your future.

Continue reading "Chicago Taxpayers Find Secret to Getting Bigger Refund" »

Everyone wants to know if bankruptcy will leave a black mark on their credit score. Yet few seem to consider the credit consequences of foreclosure.

This month we talked about bankruptcy's impact on credit - initially, filing can drop your score by a one or two hundred points. Of course, as your debt disappears, you have can begin improving your score - often to a whole new high. As Chicago bankruptcy attorneys point out, many clients qualify for credit cards or loans right after filing.

Foreclosure, on the other hand, is a whole other ball game. Let's take a look at what happens when you fail to make those mortgage payments.

Continue reading "How Foreclosure Affects Chicago Homeowners' Credit Scores" »

It used to be that kids wanted a cash allowance - today, they want a credit card of their own.

Credit card companies like Visa and MasterCard are increasingly marketing prepaid debit cards to teens and preteens. And they're convincing parents to buy the cards for their kids by pitching them as an easy way to teach children about finance. But these junior credit cards may be doing more harm than good, say Chicago bankruptcy attorneys.

Because prepaid debt cards can be loaded with a set amount of money, they show kids how to control their spending - at least, that's what credit card companies are trying to convince parents. In reality, the cards come with all kinds of fees - activation fees, maintenance fees, reloading fees, etc - that can leave kids with early debt and Mom and Dad footing the bill.

Continue reading "Credit Card Companies Targeting Kids With Prepaid Debit Cards" »

Could the idea of a perfect credit score actually be a damaging myth?

It seems that everyone from debt relief companies to singing pirates has been promoting the importance of a high credit score, but it turns out it may be an elaborate scam, say Chicago bankruptcy lawyers. Not that there's anything wrong with having a good credit score, mind you. It's just that most Americans are so terrified of doing anything to hurt their score that they fail to take actions to improve their finances, from saving money to filing for bankruptcy.

Continue reading "Credit Score Myths That Can Lead To More Debt For Chicago Consumers" »

The most common myth about bankruptcy is that folks who file will never see a good credit score - but the truth is, they might actually see a better one.

According to an expert from Bankrate.com, it's possible to not only rebuild credit after bankruptcy but to improve to a score of 750 or more. Yes, your score will drop initially after filing, but look at that point as your clean slate. Once your debts are discharged, your credit score can begin its gradual climb back up to - and past - where it was before. But there are a few steps you can take to make your progress even smoother, point out Chicago bankruptcy attorneys.

Continue reading "The Truth About Bankruptcy's Effect on Chicago Credit Scores" »

I always thought of Grandma as the penny-pinching, coupon-clipping type. So I was more than a little surprised when, after she passed away, we learned that she'd left Grandpa with thousands of dollars in debt.

Sadly, it's becoming an even more common scenario in today's economy. Rising healthcare costs and medication prices coupled with dwindling retirement portfolios are leaving seniors with little choice but to put their everyday necessities on a credit card, ringing up debt that they may not live to pay off. And that's bad news for all of us, say Chicago bankruptcy lawyers.

Continue reading "Why More Elderly Americans Are Passing Debt On To Their Families" »

If you've checked your mailbox lately, you probably already know that credit card companies are pulling out all the stops to lure new customers in 2011. But are the latest credit card offers worth it?

Following a period of tighter credit, credit card offers nearly doubled in 2010, according to a recent market study. On the one hand, banks are sweetening those offers with a wider variety of rewards cards and low-fee balance transfers with 0% introductory rates. And of course, consumers stand to benefit from recent legislation that did away with things like surprise interest rate hikes and unfairly high fees.

On the other hand, a credit card is just that - a credit card. And opening a new account could ultimately result in the same old trials and tribulations, caution Chicago bankruptcy attorneys.

Continue reading "Chicago Consumers Should Weigh Rewards, Risks of New Credit Card Offers" »