The average American holds three or five credit cards, with a total credit card debt of $8,000 or more. But that's only true in 1 out of 20 American, according to the Federal Reserves, in 2001.
And according to Bill Whitt at the VIP Forum, a Washington D.C. research firm:
=Only 29% of households owe $1,000 or more on their cards
=21% owe $2,000 or more.
=6% owe $8,000 or more
=4% owe $10,500 or more
=1% owe $21,400 or more.
According toFair Isaacs:
=About 48% of credit card holders owed less than $1,000
=About 10% of card holders had total card balances in excess of $10,000
=More than half of all people with credit cards use less than 30% of their total credit card limit
=Just over 1 in 8 people use 80% or more of their credit card limit
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In In 2003, according to the American Bankruptcy Institute, there were 1.6 million personal filings, and excessive credit card debts can very well be one of its reasons. Perhaps many of those personal filings were triggered by collection calls with threats of legal action. Consumers who know a little something about bankruptcy, would know that all collection efforts must cease once the consumer is approved for bankruptcy--via the Automatic Stay Provision. As long as the case is running creditors/collectors may not contact the consumer regarding the debt in question.
Bankruptcy is a court procedure. There would be fees to think about, papers, dates, and its impact on the credit. Bankruptcy stays on public records for up to 20 years. A Chapter 13 stays on the credit report for 7 years and Chapter 7 for 10 years--both are not removable by any law until after it's rendered its time.
Imagine the impact of a bankruptcy on your report when applying for a major loan or a new line of credit. For some, even an apartment hunting may become too difficult, and then for others, life issue after bankruptcy might be unemployment. Although there is a non-discrimination law against those who've filed bankruptcy...the stigma that's attached to the person that has gone through it is that he/she was not a desirable borrower or that he/she is irresponsible with money.
Although, there's life after bankruptcy, two years after the discharge, it's much better to first look for a good alternative to discharge credit card debts (unsecured debt). Like debt settlement. If the debt balance is $10,000 and above, the consumer might as well settle it with the collector. The original creditors usually assign the unpaid accounts (that are 6 months old to) to a third part collection agency, as mandated by the IRS, so they'd get a tax break. For some creditors, that's enough, but for some, they sue for judgment, hoping to collect on the full amount.
If the original creditors do not sue and instead assign the account to a collector, the consumer has a chance of settling for 30-60% (more or less) of the balance. And that's payable either on a lump sum payment or installment, depending on the negotiation.
One advantage of debt settlement over bankruptcy is, although it stays on the credit report for 7 years, it doesn't appear on public records. Another is, debt settlement doesn't need a lawyer, and court attendance for the consumer/client. The settlement company, once they've enrolled the consumer, would-from then on be the consumer's representative to the other side.
It's also important for consumers to learn about their FDCPA rights, so as not to be forced to file an unnecessary bankruptcy. Filing bankruptcy should be the last option for debt relief.
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