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Paying monthly mimimum on credit card debt is not a plan for success.

Posted by Brian Hallaq | Mar 02, 2023 | 0 Comments

If you are not working, resist the temptation to get into more debt.

Once upon a time getting a credit card was a big deal.  I remember my Dad getting a Diner's Card in the 1970's and he was very proud that the qualified for a card that was of extremely limited use.  Today, we read about stories of infants and family pets qualifying for credit cards so the availability of high interest credit has simply reached levels of absurdity.

In the post-Covid era, many people have not yet returned to the job market for a variety of reasons, ranging from going back to school, lingering effects of illness, or simply using unemployment or other subsidies instead of wage income.

In the middle of that situation, it is not unusual for credit card companies to reach out to you to offer you credit lines, even if you have no visible source of income.  In fact, even the Small Business Administration has been reaching out to people, who are not working, and offering fairly large lines of credit.  There is simply no logic to these extensions of credit, but they can come at a time when you might need it the most.  Most people would rather get into more debt than consider eliminating their existing debt in a Bankruptcy so these offers can be very seductive.

If you can avoid taking on credit when you are not working, you need to try to do so for the following reasons.

First, your situation is not going to improve with the additional debt that you will incur.  At the rates of interest that the lender is charging, coupled with the fact that you have no income, you are immediately throwing yourself into financial distress.

According to a recent study published by WalletHub, the average credit card debt of a typical American rose from $8,500 in the first quarter of 2021 to $9,300 in the third quarter of 2022.  According to the Daily Wire, American household debt rose $320 billion dollars in 2022, which makes it one of the highest increases in the past 20 years, reaching the levels not seen since the 2008 financial crisis.

The last time this happened, the American housing market crashed and we were plagued by a severe recession.  We are already seeing the effects of this economic downturn, as major companies such as Amazon, Disney, and Microsoft are laying off thousands of workers.

That means that if you were intentionally not working under the belief that a job might be waiting for you when you are ready to get back to work, you might be in for a unpleasant shock.

Second, the inflationary pressures in the economy are making each dollar that you do have worth less.  According to the Bureau of Labor Statistics, prices for groceries, energy, and other necessities rose, and inflation has reached a rate of 6.4%.

In this midst of all of this, you will suddenly get a pre-approved credit card, or a solicitation from a high interest lender, and it seems like it arrives just at the right time.

But remember, that if you do not have the means to service (or more importantly pay off) the debt, you are simply prolonging the inevitable.  In addition, you can create all sorts of problems for yourself.  For example, one trick that lenders will do in order to give you a much larger loan is to have you mail them the title to your (paid off) car.  Once the title is in their possession, if you try to file for Bankruptcy, they will be treated like a secured creditor and if you want to keep your car, you need to keep that debt.

Another issue becomes using the credit cards when you don't have a visible source of income.  Some credit card companies will object to your discharging their debt in Bankruptcy under the theory that you charged on the credit line without ever having an intention of paying back the debt, because you were not working (even though they knew you were not working when they gave you the credit in the first place).

All of this is to say that as the economy worsens, you should not dig a hole for yourself.  If you can work, then you should try to go back to work.  Many employers offer health insurance options which can dramatically save your family costs related to medical care.  In addition, while unemployment benefits are helpful, you often have to have been working recently to secure additional benefits, so that safety net might be denied you if you choose not to go back to work.

The formula for success is to try to work, try to save, and definitely try to keep your debt to a minimum.  If your debt is overwhelming, now is the time to talk to a Bankruptcy attorney to eliminate the debt rather than accumulate more debt.

About the Author

Brian Hallaq

My name is Brian and I have been a practicing attorney in Bankruptcy for over 20 years helping thousands of clients.  I have worked for the Chief Judge of the United States Bankruptcy Court for the Western District of Washington, as well as several small boutique Bankruptcy law firms handling Bankruptcy cases in Washington State and the State of California.  I have litigated for and against major banks, and I have recovered millions of dollars on behalf of clients in my career.


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Are creditors calling you? Is there an unexpected job loss? Increasing medical bills? Are you using your credit cards to buy groceries and cannot afford to pay the minimum? We understand the stress that financial hardships can cause to you, and the confusion about choosing the right solution. As experienced Bankruptcy attorneys, Brian and Diem Hallaq can help you regain control over your finances. We help clients who want to file Chapter 7 and Chapter 13 Bankruptcy petitions.

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