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If you're defaulting on credit cards, consider bankruptcy

As the national economy improves, more Americans are taking the risk of making purchases with credit cards. Although economists note the increase in consumer confidence as a positive factor for the economy, the reality is that rising credit card debt is bound to start causing problems if it continues unchecked. According to a recent report, one indicator of a potential problem is the rate at which consumers are defaulting on credit card debt.

The recent report noted that, for five straight months now, the number of credit card defaults has risen. That rate is now at its highest point in four years. But, why is this happening? Well, when compared with other types of debt, such as a mortgage or auto loan, credit cards typically have the highest interest rate. That means that as the balance on a credit card rises each month, more interest will be charged. That can lead to a point where Tennessee residents are unable to even make the minimum payments on credit cards each month.

Fortunately, anyone who is facing these kinds of financial challenges may be able to find debt relief through a personal bankruptcy filing. Overwhelming credit card debt is one of the most common reasons why Americans file for bankruptcy. By filing for bankruptcy, consumers can address their debt problems head-on.

In a Chapter 7 bankruptcy, also known as liquidation bankruptcy, consumers will list their non-exempt assets, which will then be sold, with the proceeds applied toward outstanding debt. Any remaining debt will then be discharged. In a Chapter 13 bankruptcy, consumers come up with a repayment plan that allows them to repay their debt over the course of three to five years.

Source: Investopedia.com, "Credit Card Default Rate Hits 4-Year High," Aaron Hankin, April 28, 2017

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Kenneth C. Rannick, P.C.
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