Blog
Law Offices of Chance M. McGhee

Call Today for a FREE Consultation

210-342-3400

Archive for the ‘credit cards’ tag

Keep an Open Mind about Chapter 7 or 13

November 17th, 2017 at 8:00 am

Here’s an example why to keep an open mind about filing under Chapter 7 vs. Chapter 13. Slightly different facts can make all the difference. 

 

Last time we introduced some of the main differences between Chapter 7 and Chapter 13. We suggested that you learn about them but also keep an open mind when you go see a bankruptcy lawyer. At that meeting you will always hear about advantages and disadvantages of each option you didn’t know about. Often you hear for the first time about certain tools that can really help you. So you may end up going a different route than you expected.

Here are two versions of an example that illustrates this well.

An Example Using Chapter 7

Assume the following. Three months after losing a job you get another one at a somewhat lower salary than before.  Over the years before you’d accrued $50,000 in credit card debt and medical bills on which you’d started falling behind. While you weren’t working you fell even further behind and one medical collector has just sued you. You’re now also 2 months behind on your $1,500 monthly home mortgage payments ($3,000). For personal and financial reasons you really want to keep your home.

A Chapter 7 “straight bankruptcy” case would very likely discharge (legally write off) all of your non-mortgage debts. In this example that would enable you—with a short-term tight but realistic budget and a temporary part-time job—to pay one and a half mortgage payments each month ($1,500 + $750) for four months to catch up. Your lawyer contacts your mortgage lender which agrees to that catch-up schedule.

So you decide to file a Chapter 7 case as a means to get current on your mortgage, and to get a fresh financial start. About 4 months after filing the case you’d have both.

An Example Using Chapter 13

Change the facts this time so that now you’re 8 months behind ($12,000) on your mortgage instead of just 2. Also your budget is tighter and no part-time job is available. So without paying any of your credit card and medical debts you can only afford $300 per month. At that rate you would need 40 months to catch up on your $12,000 mortgage arrearage. Your lender says that’s totally unacceptable.

A Chapter 13 “adjustment of debts” would give you up to 5 years to catch up on the mortgage. The mortgage lender would generally have to go along with this—be unable to foreclose or take other collection action—as long as you consistently stuck with your plan. You would have to pay all you could afford to every month for at least 3 years. You’d have to pay for 5 years if your income was too high. Either way the money would first go to catch up the mortgage. (This would be after or simultaneously while you were paying your lawyer fees and trustee fees). You would usually only pay the other debts—the credit cards and medical debts) if and to the extent you had money left over during the 3-to-5-year payments period.

Because you really want to keep your home you decide to file a Chapter 13 case. You don’t mind its length because that’s to your advantage—more time to catch up on the mortgage so that you can reasonably afford to do so. About 4 years after filing the case you finish catching up, the remaining debts are forever discharged, and you have a fresh financial start. You owe nothing except the fully-caught up mortgage. It took a lot longer than a Chapter 7 case but saving your home made it well worthwhile.

Conclusion

In both of these scenarios you were behind on a mortgage on a home you wanted to keep. In the first scenario the tools of Chapter 7 enabled you to meet your goal. In the second you needed the stronger tools of Chapter 13.

This is a simplistic example. Even here this illustration show that it’s important to keep an open mind about which Chapter is better for you. Real life is usually much more complicated. That’s all the more reason to get informed about your options and then be receptive about your lawyer’s legal advice about them.

 

Timing: Writing Off Recent Credit Card Debt

September 25th, 2017 at 7:00 am

Using a credit card shortly before filing bankruptcy doesn’t seem right. The law agrees. Writing off this kind of debt can be a problem. 


Our last blog post was about writing off—“discharging”—income taxes.  The conditions you have to meet to discharge a tax debt are mostly very clear. These conditions are based on rather straightforward calculations of time. If you don’t meet those time-based conditions the tax does not get discharged; you still owe it.

Credit card debts are completely different. First, they’re almost always discharged. Second, there are some timing rules but those rules don’t necessarily decide whether or not the credit card debt is discharged or not. We’ll explain all this in today’s blog post.

The Point of the Timing Rules

With income tax debts, they’re NOT discharged unless you meet the timing rules. With credit card debts they ARE discharged unless you meet the timing rules.

With income taxes the debt is not discharged unless it’s been long enough since the pertinent tax return was due and since that tax return was actually submitted to the IRS/state. The point of the rules is the give the IRS/state a chunk of time to try to collect the tax.

With credit cards the debt is discharged unless it’s been too short of a time since the credit card charge. The point of the rules is to make it harder to discharge a charge incurred after deciding to file bankruptcy.

A Mere Presumption

As we just said, the timing rules with credit cards merely make it harder to discharge a credit card debt.  If you run afoul of the timing rules with income taxes, you absolutely still owe the tax. With credit cards, if you run afoul of the timing rule there’s only a bigger chance that you would owe it. It just gives the creditor an easier time of making you pay it—a presumption that it can’t be discharged. But that creditor still needs to act or else it loses that advantage. The entire credit card debt could still get discharged.

For example, if you owed $7,500 on a credit card, of which you incurred $1,000 recently, the entire debt would be discharged in bankruptcy if the creditor did not timely object.

 Only a Portion of the Credit Card Debt is at Risk

With income taxes the entire tax is either discharged or it’s not. With credit card debts, most of the debt could be discharged while only the portion that violates the timing rules is not.

In the above example, only the $1,000 incurred recently, in violation of the timing rules, would usually be at risk of not being discharged.

In Rare Circumstances the Entire Credit Card Debt Could Be at Risk

The following may be confusing in light of what we said so far. If a creditor has evidence that you incurred the entire credit card debt without the intent to pay it, the creditor can challenge the discharge of the entire debt. The timing rules do not need to apply (although if they would that may make the creditor’s argument easier).

In the above example, if the creditor somehow had evidence that you didn’t intend to repay any of the $7,500 at the time you incurred the debt, the creditor could object to any of the $7,500 debt being discharged. It doesn’t matter how long ago that $7,500 debt was incurred.

The Timing Rules

So here are the timing rules.

If you buy more than $675 in “luxury goods or services” (essentially, any non-necessity) from any single creditor during the 90-day period before your bankruptcy is filed, that specific debt is presumed not to be discharged. Also, if you make a cash advance of more than $950 from any single creditor during the 70-day period before your bankruptcy is filed, the debt from that cash advance is presumed not to be discharged.  See Section 523(a)(2)(C) of the U.S. Bankruptcy Code.

The Presumption Is Only a Presumption

Just because a purchase/cash advance meets these conditions do not necessarily mean you can’t discharge that part of the debt. You can defeat the presumption with evidence that you did actually intend to pay the debt when you incurred it. You can still win by persuading the court of your honest intent. You and your bankruptcy lawyer can do this through your own testimony. You can also provide evidence of other relevant facts, such as of you making payments after incurring the debt, or the subsequent event(s) in your life that induced you to file bankruptcy (and not pay the debt after all).

The Dangerous Judgment Lien

January 4th, 2017 at 8:00 am

A judgment lien effectively converts a debt that was secured by nothing into one secured by your home. 


Has a creditor sued you and gotten a judgment against you? If so, and you own a home, most likely there is now a judgment lien against your home.

The Dangerous Judgment Lien

What’s a lien? It attaches an asset you own to a debt you owe, and secures the debt with it.

judgment lien, in most states, attaches your home to the amount you owe to the judgment-holding creditor. Usually without your consent, your home then secures that debt.

A judgment lien gives the creditor huge leverage to make you to pay the entire debt. Not only pay the debt, but also the creditor’s attorney fees, its other costs for getting the judgment against you, and its constantly accumulating interest.

If you try to sell or refinance your home, the judgment lien forces you to pay the judgment.  That debt has to be paid—usually in full—out of the sale or refinancing proceeds. It comes straight out of money you would have otherwise received. A judgment lien can sometimes also prevent you from being able to do the sale or the refinance altogether.

Under some circumstances and in many states, the creditor can foreclose on the judgment lien even if you don’t sell or refinance the home. You could lose your home if you don’t come up with a way to quickly pay off the judgment amount.

Stealth Judgment Liens

Usually you know it when you’ve been sued by a creditor. You are served with papers that make that clear.

But sometimes you are not personally served and don’t know about the lawsuit. Or you may receive papers but don’t read them closely. Or you realize you’ve been sued but then nothing seems to happen and you don’t find out what did in fact happen with the lawsuit.

If you don’t respond by the deadline stated in the papers you receive, the creditor automatically wins the lawsuit. A judgment is entered against you in the amount the creditor sued you for. A judgment lien is then placed on your home in that amount plus the creditor’s often-substantial costs.

If you are not paying attention, you could easily have no idea that the court entered a judgment against you. Even if you are paying close attention, you are not necessarily informed that a judgment has been entered. And even if you do know about the judgment, you may not find out that your home now has a lien on it in the amount of the judgment.

Judgment Liens after Settlement

You could also have a judgment lien on your home even if you closely cooperated with a creditor. Have you ever settled with a creditor, agreeing to make monthly payments on a debt? The settlement could have included the creditor’s right to enter a judgment against you. That way it doesn’t have to go through the costs and delay of suing you if you don’t make the agreed payments.

Even if a judgment was not entered at the time of the settlement, it’s standard practice that one is entered automatically if you fail to make the agreed payments on time.

These kinds of settlements can be entered into whether or not the creditor filed a lawsuit before the settlement. So, if you’ve entered into a settlement with a creditor, you could easily have a judgment lien on your home. And that could be true even if you are current on your settlement payments.

The Limitations and Benefits of Bankruptcy

Bankruptcy writes off (“discharges”) most kinds of debts, but is generally not very good at getting rid of liens. Liens are creditors’ rights against your property, rights that the bankruptcy law generally respects. For example, if you want to keep your vehicle in bankruptcy, you generally have to pay off its lienholder.

But in many situations you CAN get rid of a creditor’s judgment lien on your home. We’ll show in a couple days in our next blog post.

 

Creditor’s Failure to File a Proof of Claim in Chapter 13

December 23rd, 2016 at 8:00 am

If a creditor doesn’t file a timely proof of claim on a debt in your Chapter 13 case, you pay nothing on that debt. 


Our last blog post was about Chapter 13 “adjustment of debts” cases in which you don’t pay anything on any of your “general unsecured” debts. In parts of the country where that’s allowed, those debts are fully and forever discharged after you pay nothing. That’s a pretty good debt “adjustment.”

But that can happen only in certain circumstances, with certain combinations of debts, assets, income and expenses. What’s much more common is a Chapter 13 case in which you would pay nothing only to certain creditors. That happens often because creditors regularly fail to file their proofs of claim on time with the bankruptcy court.

Sometimes that has little or no effect on how much you pay into your Chapter 13 plan before it’s completed. But sometimes it makes a huge difference. It could potentially save you lots of money, or even significantly shorten the time you’re in your payment plan.

Proofs of Claim in Chapter 13

Chapter 13 cases are usually 3- to 5-year payment plans. You would usually file one so that you could focus on paying certain special debts. Those special debts are either secured or “priority” debts. For example, you may want to catch up on arrearage on your home mortgage so that you could keep your home. Or you may need to pay income taxes that wouldn’t be discharged in a Chapter 7 case. The rest of your debts—“general unsecured” ones—usually just get whatever money you have left over the course of your Chapter 13 plan.

The Chapter 13 documents that your lawyer files at the bankruptcy court include a complete “schedule” of all your debts. The creditors on those debts all receive notice of your case. They are required to file a “proof of claim” stating how much you owe and the nature of the debt. A creditor that fails to file a timely proof of claim receives nothing through your Chapter 13 case. Then, unless the debt is of a kind that does not get discharged, it gets discharged when you successfully complete your case.

Focus on “General Unsecured” Debts

As mentioned above, you usually WANT to pay certain debts—such as a home mortgage arrearage and nondischargeable income taxes. So you want to be sure certain creditors DO file proofs of claim.

But usually you don’t care whether any particular “general unsecured” debt gets paid. In fact if it saves you money, you prefer that such creditors DON’T file a proof of claim. So the question is, what happens when a creditor with a “general unsecured” debt fails to file a timely proof of claim?

It depends on the terms of your Chapter 13 plan.

When It Doesn’t Make Any Monetary Difference

Many Chapter 13 plans have a designated amount that the debtor is paying towards the “general unsecured” debts. That amount is essentially what’s left over after the secured and priority debts are paid. Usually that’s less than the total amount of the “general unsecured” debts—often much less.

For example, if you have $50,000 in “general unsecured” debts you may have only $5,000 available to pay on those debts over the 3-to-5-year span of your plan. That’s a 10% payment plan. If one creditor with a $10,000 debt fails to file a proof of claim, it usually wouldn’t make a difference. You’d likely still need to pay $5,000 towards your “general unsecured” debts. But now that same amount would be distributed over the remaining $40,000 of debts. So you’re paying 12.5% of the remaining $40,000 in debts. Your same $5,000 is just spread out over fewer debts, with no monetary difference to  you.

When It Does Make a Monetary Difference

Although not terribly common, there are Chapter 13 plans requiring the debtor to pay the “general unsecured” debts in full. That’s a 100% plan. If one creditor fails to file a timely proof of claim, the amount the debtor must pay is reduced dollar-for-dollar. Not having to pay that debt can result in a lower monthly plan payment, a shorter plan, or both.

If the debt or debts without a filed proof of claim is/are large, this can significantly shorten your case.

A similar result can happen in a high percentage payout case, with a twist. Take the example of a debtor paying 90% of the “general unsecured” debts. If no proof of claim is filed on a significant debt, the money that had been earmarked for it would likely go to the other debts. But once all the “general unsecured” debts with proofs of claim are paid 100%, the debtor would not have to pay any more. That Chapter 13 case would be shortened accordingly.  

Every once in while a creditor or set of creditors fail to file proofs of claim so that little or no “general unsecured” debts are left. Conceivably that Chapter 13 case could be over in a matter of just a few months, instead of years.

Caution

Definitely talk with your own bankruptcy lawyer about this, because different Chapter 13 trustees and judges may have different practices and procedures. Chapter 13 trustees sometimes file proofs of claim on behalf of creditors to avoid a missed deadline. Or a bankruptcy judge may determine that a creditor did not get adequate notice of your bankruptcy case in order to be held to the proof of claim deadline.

Also, your lawyer can tell you the creditors’ deadline to file their proofs of claim. Then you can monitor the filed proofs of claim and their potential impact on your case.

 

New Thresholds for a “Luxury” Purchase or Cash Advance to Be Presumed Fraudulent

February 29th, 2016 at 8:00 am

Creditors will be a little less likely to challenge the writing off of recent uses of credit.


As of April 1, 2016 creditors will have slightly harder time showing that recent credit purchases or cash advances were fraudulent and so can’t be written off (“discharged”) in bankruptcy. That’s because to qualify for a “presumption of fraud,” creditors will need to have a higher dollar amount threshold before that presumption kicks in. The “presumption of fraud” makes it easier for a creditor to object to the discharge of a debt. With the new higher threshold, the “presumption” will not kick in quite as often, to the benefit of consumers filing bankruptcy.

If you’ve made credit purchases or cash advances in the last few months and are considering bankruptcy, this may benefit you.

Discharge of Debts in Bankruptcy

When you file bankruptcy most kinds of debts are discharged so that you never have to pay them. But certain select debts are never discharged—such as past-due child support. And some kinds of debts are discharged unless the creditor objects to the discharge and persuades the bankruptcy court that certain conditions are met so that discharge is not legally appropriate.

Debts of this last kind—that may be objected to—include those allegedly incurred through fraud or misrepresentation. Among those are recent ‘luxury’ purchases and cash advances. Under certain circumstances the Bankruptcy Code says those “are presumed to be nondischargeable.” How does this “presumption” work, and how could the upcoming adjustments in the law help you?

The Fraud Exception to the Discharge of Your Debts

One of the principles of bankruptcy is that you can’t purposely cheat a creditor in the incurring of a debt and then later discharge that debt through bankruptcy. Specifically, a creditor can challenge your ability to write off a particular debt if it was “obtained by… “false pretenses, false representation, or actual fraud… .” See Section 523(a)(2) of the Bankruptcy Code.

What’s a “Presumption”?

As mentioned above, a creditor has to object to the discharge of a debt that it thinks you incurred fraudulently, or else that debt will be still be discharged. In its objection the creditor normally has to provide evidence to the court proving your alleged fraud or misrepresentation. A presumption of fraud allows the creditor’s objection to go forward even without direct evidence of fraud. All it needs to show that certain circumstances arise that give rise to a “presumption” that you’ve committed fraud in how you incurred the debt.

The two sets of circumstances in which a presumption of fraud arises are with purchases of “luxury goods or services” and with cash advances, both occurring within a certain amount of time before the filing of your bankruptcy case.

The “Luxury Goods or Services” Presumption

Before April 1, 2016 if a consumer buys more than $650 in “luxury goods or services” in the 90 days before filing the bankruptcy, that debt is presumed not to be dischargeable. That means that the creditor may not need to provide direct evidence that the debtor did not intend to pay the debt at the time the purchase.

The rationale behind this presumption is that there is a sensible chance that within that short of a time before filing bankruptcy most debtors would either know that he or she intended to file bankruptcy, or would be considering doing so. If so, then at the time of purchase there is a greater likelihood the debtor did not have the intention to pay the debt arising from that purchase.

This presumption only applies to the purchase of “luxury goods or services.” But the meaning of this phrase is much broader than it sounds. It includes everything except goods or services “reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor.”

As of April 1 the $650 threshold of “luxury goods and services” purchased within the 90 days before filing is increasing from $650 to $675. That means that you can make slightly more in purchases during this time period before the presumption kicks in. So this advantage for creditors is being narrowed a little. (See Section 523(a)(2)(C)(i)(I).)

The Cash Advances Presumption

Similarly, if a consumer incurs a debt of more than $925 ($950 starting April 1) through one or more cash advances made in the 70 days before filing the bankruptcy, then that debt is presumed not to be dischargeable. Again, that means that the creditor may not need to prove through evidence that the debtor did not intend to pay the debt at the time the cash advance. (See Section 523(a)(2)(C)(i)(II).)

The Presumption Can Be “Rebutted”

We are saying that the creditor MAY not need to prove fraud because that occurs only if you don’t respond by “rebutting that presumption.” Once the creditor “raises the presumption” by alleging the necessary facts to fit within the presumption, you can force the creditor to back up the presumption with evidence. The creditor can win with only the presumption of fraud if you don’t push back. But with the right facts you can defeat the presumption and not have to pay the debt.

 Assume, for example, that you made a cash advance of more than $925/$950 within the 70 day period before filing bankruptcy, and the creditor objects to the bankruptcy court. If you in fact did intend to pay the debt at the time you made the purchase, you would respond to the court about your honest intent. You and your attorney would do this through your own direct testimony about your intent and/or by establishing other relevant facts, such as what happened in your financial life after you made the cash advance which then drove you to file bankruptcy and seek to discharge that debt.

A Creditor Can Bring Evidence of Fraud without a Presumption

On the other hand, a creditor can object to the discharge of a debt on grounds that you didn’t intend to pay it at the time of the purchase or cash advance or some other kind of fraud, and do so without the presumptions. For example, a creditor could object to the discharge of a debt that was incurred through a misrepresentation, such as with a credit application that greatly exaggerates a debtor’s income or assets, a year or two before the bankruptcy filing.

A presumption helps a creditor in the circumstances where they apply. But if a presumption doesn’t apply, the creditor could still potentially challenge your ability to discharge that debt. The creditor would have to give the court strong evidence that you did not intend to pay the debt, which is usually not easy to come up with. That’s why creditors are not as likely to challenge purchases and cash advances that were made outside the presumption periods.

Avoiding These Presumptions of Fraud

You can avoid giving a creditor the advantage of these presumptions. First, you can avoid using any credit and making cash advances in the few months before filing bankruptcy. And, second, if you’ve already incurred made such purchases and/or cash advances you could just hold off on filing bankruptcy until enough time has passed to get beyond these 70 and 90-day presumption periods.

Remember again that if a creditor thinks it has evidence that you incurred a debt that at that time you did not intend to pay, or that there was some other kind of fraud or misrepresentation, the creditor may still decide to raise the issue without the benefit of a presumption. But if you avoid filing within the 70/90-day presumption periods you will decrease the chance that a creditor will challenge the discharge of its debt. 

 

Bankruptcy Timing and the Holidays: The “Cash Advances” Presumption of Fraud

December 14th, 2015 at 2:00 am

If you can, don’t do cash advances during the holidays if you’re contemplating filing bankruptcy. If you do, understand the rules about them.

 

In our last blog post we explained the “luxury” presumption of fraud. This provision in bankruptcy law increases the risk that you would not be able to “discharge” (legally write off) a very particular kind of debt. That kind of debt would be one that resulted from a purchase or a set of purchases totaling more than $650 made during the 90 days before filing bankruptcy.

The “cash advances” presumption of fraud is closely related to the “luxury” one. The dollar amounts and timeframe are just a little different. This “cash advances” presumption increases the risk that you would have to pay a debt tied to a cash advance or set of cash advances totaling more than $925 made during the 70 days before filing bankruptcy. (Notice that for this presumption to kick in, you incur somewhat more credit in a somewhat shorter period of time than with the “luxury” presumption of fraud.)

The Risk of Doing Cash Advances Shortly Before Filing Bankruptcy

We keep talking about the increased risk of not discharging a debt. What do we mean by this?

We mean that you could very well still discharge a debt from a cash advance done within the 70 days and more than $925. There’s just a greater risk that you couldn’t. Let us explain.

First, if you happen to do a cash advance of more than $925 (or a series of them with the same creditor) within the 70 days before filing bankruptcy, you may not have to pay that debt. That’s because you will not have to pay it unless a creditor complains about it, and does so within a deadline which is about 100 days after your bankruptcy case is filed. If you list the creditor in your bankruptcy case and it doesn’t complain within the deadline, that cash advance debt would simply be written off.

Second, the creditor may file a formal complaint and do so on time but that doesn’t mean it will win. A cash advance within the 70 days and exceeding $925 only creates a presumption that you didn’t intend to pay that debt. That presumed intent can be defeated by evidence showing that you did actually intend to pay it at the time you did the cash advance(s).

Third, you can avoid this “cash advance” presumption altogether by simply waiting to file your bankruptcy case until at least 71 days after the (latest) cash advance.  Then the creditor gets no presumption of fraud and actually has to come up with evidence that you didn’t intend to pay the cash advance debt. Without some evidence it can’t file a complaint (although the evidence could be circumstantial, such as you not making any payments on the account after the cash advance indicating lack of intent to pay it).

The Risk of Doing Cash Advances More than 70 Days before Filing Bankruptcy

Even a cash advance done outside the 70-day presumption period comes with some risk that this cash advance debt would have to be paid. The creditor just has to have evidence that you didn’t intend to pay the debt, no matter when the debt was incurred.

Two Practical Truths about the Advantage of Presumptions of Fraud

Beyond anything written in the law, here’s why the “cash advance” presumption of fraud (and the “luxury” one as well) works in favor of creditors:

1) The presumptions allow creditors to win without any evidence of fraud in cases where the debtors don’t respond to the creditors’ complaint. Because debtors who file bankruptcy not represented by an attorney are much more likely to not respond, some creditors are more inclined to file these complaints in those unrepresented cases. When the debtor does not respond on time, the creditor gets a judgment by default against the debtor.

2) When a debtor does respond (generally through his or her attorney) to a creditor’s complaint, the matter is often settled with the creditor getting paid at least something out of the cash advance at issue. That’s because the high cost in attorney time compared to the relatively small amounts usually at issue often makes fighting the complaint much more expensive than just quickly settling it.

Because of these two practicalities, the presumptions of fraud gives creditors more motivation to file complaints whenever there is a cash advance exceeding $925 during the 70 days before a bankruptcy filing, even without much indication that the debtor didn’t intend to pay that debt at the time.

The Bottom Line

The presumption only gives a modest legal leg up. But the practical advantage is significant. So whenever possible it’s usually worth waiting to file your bankruptcy case until after the 70-day “cash advance” presumption of fraud period (and the 90-day “luxury” one as well) has passed.

 

Strategies to Avoid Credit Card Debt

July 17th, 2015 at 10:13 am

Texas bankruptcy attorney, Texas chapter 7 lawyer, Texas chapter 13 attorney,Credit can be a helpful tool when a person faces unexpected financial hardship, but it is also a major contributor to many Americans’ debts. The convenience of credit and bonus offers from credit card companies motivate many consumers to spend out of their budget.

By understanding how to manage credit cards responsibly, it is possible to avoid the stress and uncertainty that come with insurmountable debt. Read on to learn three strategies to avoid credit card debt.

Keep Diligent Records of What You Spend

Online shopping has made it particularly easy to overindulge with credit cards. People can spend thousands with the click of a few buttons.

According to the Federal Trade Commission, one of the best ways to avoid serious debt from online spending with credit is to keep a record of purchases. This will help you understand how much credit spending is affecting your finances.

Do Not Spend More than Half of Your Credit Card Limit

As a general rule, you should never spend more than half of your credit limit. This will ensure that you have credit available in a financial emergency. It can also prevent compulsive spending.

When Dealing with Debt Collection Efforts, Always Keep a Record

Collection agencies love to harass debtors who have outstanding balances. They often call debtors several times each day to request payments.

Even if you are in collections, it is important to understand that you still have rights. There are laws that limit the strategies collection agencies can use to recover payments. Be sure to keeping a record of your communications with debt collectors to protect your rights.

If outstanding credit card debt has become too much for you to handle, call an experienced San Antonio bankruptcy attorney. At the Law Offices of Chance M. McGhee, we can evaluate your situation and create a debt-relief plan. This may involve chapter 7 or 13 bankruptcy, or a bankruptcy alternative. To get started, call our office today at 210-342-3400 for a free initial consultation.

Three Proven Methods to Improve Your Credit Score

November 13th, 2014 at 8:59 am

improve credit score, San Antonio bankruptcy lawyerTo say that a person’s credit score is important is an understatement. Your score not only affects your ability to take out loans and successfully apply for credit cards, but it also plays a role in applying for insurance, leasing a car, and even getting an apartment. More than just three numbers, a credit score is a measurable value of how trustworthy a person is with money and payments.

For these reasons, you should make every attempt to raise your credit scores as high as possible. Here are some helpful ways to boost and maintain a respectable credit score:

1. Start with What You Have

As mentioned before, it helps to think of a credit score as an indicator of financial responsibility. That said, the road to a better credit score begins by analyzing one’s own financial situation. While this may require sitting down with a professional, here are some basic strategies to get started:

  • Focus on paying off credit cards by making monthly payments;
  • Strive to keep balances low on credit cards;
  • Make attempts to pay off debt instead of moving it around; and
  • Keep card accounts open.

These are some basic options available to anyone with one or more credit card accounts. These steps may not be easy, but accomplishing them can go a long way toward improving one’s credit score.

2. Open New Credit Card Accounts

If you have no credit at all, it is imperative to start building it. A smart first step is applying for a credit card. For those who already have lines of credit and are looking to boost their score, it may be worthwhile to open a new account.

It is important to remember that it is quite easy to get over your head when it comes to credit cards. Responsible use of a new account, however, can lead to a significant credit score boost.

3. Do Not Spread Small Charges across Different Cards

Making small purchases, usually under $100, across different credit cards can ultimately harm your credit score. It is best to rely on as few cards as possible. Having small amounts of debt across various cards, often referred to as “nuisance charges,” is not only bad for your credit, but it also can quickly build up to create a difficult situation.

If you are looking for a San Antonio, Texas bankruptcy attorney or are curious about how bankruptcy might work for your financial situation, contact the Law Offices of Chance M. McGhee. Call 210-342-3400 to schedule a free initial consultation.

Four Ways to Manage Credit Card Debt

October 21st, 2014 at 12:18 pm

credit card debt Texas, San Antonio bankruptcy lawyerCredit cards are a double-edged financial sword. Aside from their obvious benefits and functions, many banks offer points systems and other rewards for using their cards. Many Americans, however, are all too familiar with the possible risks associated with credit card use—especially when one falls behind on payments.

Nearly every American has a credit card–and likely more than one. According to TIME, the overall amount of debt incurred by Americans has actually been in decline. While this is great news for some, others are still facing the challenge of keeping up with payments, dealing with harassing creditor calls, and possibly even considering bankruptcy.

Solving debt problems is about active financial planning and making smart choices. Here are four helpful ways to regain control of credit card debt:

1. Make Monthly Payments, Meeting or Exceeding the Minimum Payment

What is the most basic solution to solving debt? Paying it off. Unfortunately, resolving debt is not always that simple. Debtors should make every effort to organize their finances and make sure enough money is available to meet those credit card payments every month. Late payments result in penalties and harm an overall credit score.

While purchasing an expensive item and only having to pay a small amount each month is alluring, making only minimum payments is not always the best choice. If possible, it is always a great idea to try to pay more than the minimum—sometimes twice as much.

Aim for minimum payments, and try to exceed them when possible.

2. Focus on High-Interest Debt

It is often surprising to many Americans how quickly credit card interest can add up. This is why it is so important to prioritize payments for cards with the highest interest.

By paying off high-interest cards first and continuing to make minimum payments on the low-interest ones, overall debt levels become much easier to control.

3. Limit Credit Card Use and Spend Wisely

Depending on one’s financial and living situation, this may be difficult. When attempting to solve a serious financial problem, limiting credit card use while paying them off is critical for lowering overall debt. Again, many people rely on their credit cards for day-to-day living, so this can be a challenge.

Try to pay for items with cash first. Only use credit cards for necessities.

4. Save Money

This is another challenge for those in debt, but is important. While every attempt should be made to pay down credit cards, savings should not be neglected; this is key to establishing long-term monetary stability. After paying off high-interest cards, not having any cash saved away can often cause the debt to come back as the credit cards become an easy way to make purchases.

Prioritize paying off debt, but be conscious about the necessity of saving money.

If your credit card debt has become too much to handle, we may have a solution. Bankruptcy, for many Americans, is not only a way out of debt but is also a path to financial success and independence. As an experienced San Antonio, Texas bankruptcy attorney, Chance M. McGhee has helped clients for the past 20 years solve their financial challenges. Call the Law Offices of Chance M. McGhee today at 210-342-3400 for a free consultation.

The Link Between College and Credit Card Use

February 28th, 2014 at 12:15 pm

college, credit card card, debt, bankruptcy For many families, education is one of the biggest investments that parents will make for their children’s future. Even when some steps are taken to plan for this costly life goal, some expenses can creep up, leading parents and students to rely on credit cards to help. When credit card debt grows out of control, sometimes bankruptcy is the only option to get a fresh start.

According to Sallie Mae, between 3 and 5 percent of parents used credit cards to help pay for educational expenses for the years 2009-2013. In 2013, the average college student spent about $3,156 on their own credit cards, too. Whether it’s tuition, books, transportation, or other expenses, this credit card usage can add up.

When parents are already strapped for cash, they might get stuck only being able to make the minimum payment on their own credit cards. For students, often new to the credit card game and often with a very limited income, credit cards can add on to a massive amount of debt on graduation when coupled with student loans.

With some families, relying on that credit card for extras or emergencies is the only way to make it through an expensive venture like college. If there’s not a plan in place for repayment or if a family member loses his or her job, however, debt can spiral out of control fast.Relying more and more on credit cards can put both parents and students in a difficult financial situation, making it difficult to climb out and get a fresh start.

If your family has been affected by an increasing reliance on credit cards while one or more students was working towards a college degree, you might feel trapped by more debt than you can handle. Contact a Texas bankruptcy attorney today if you need to start over.

Call today for a FREE Consultation

210-342-3400

Facebook Blog
Back to Top Back to Top