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Avoiding Chapter 7 in credit card debt cases

Most American households carry some form of credit card debt. Here in Kentucky and elsewhere in the nation, however, this debt can take a serious financial and psychological toll on those who carry it. Understanding how credit works and how best to pay it back is the first step toward solving a debt problem, in advance of more involved solutions like Chapter 7 bankruptcy. 

Research conducted by a prominent financial publication suggests that, of all households with credit card debt, some 35 percent made only the minimum payment toward their bill each month, with a further 8 percent making less than the minimum. This is widely regarded as the worst way to pay down credit debt, as paying less than the minimum can count as a missed payment, and paying the minimum typically covers the accrued interest, with very little going toward the principal. In addition, paying only the minimum means it will take years and sometimes decades to pay down the principal.

Some calculations suggest that paying down $1,000 with an 18 percent APR and a 2 percent minimum payment would take over 12 years, with the borrower accruing some $1,400 in interest during that time. This is why it is so important to pay more than the minimum if at all possible. Once this is in place, other options including balance transfers or personal lines of credit become feasible. 

Of course, not everyone is in a financial position to cover more than their minimum payment. Kentucky residents facing that level of debt may choose to file for Chapter 7 bankruptcy, liquidating assets to pay down credit debt. In certain cases, this can be a wise financial move that can help get an individual or family back on their feet and out from under crushing levels of debt. 

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Law Office of Ginger C. Cord, PSC
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