Bankruptcy and Guilt

19 Jan Bankruptcy and Guilt

“I need to file bankruptcy, but I feel so guilty about not paying my bills.”  I hear this a lot during initial conferences with clients asking about debt relief.  My answer is usually the same: look at the amount of money you have paid to the credit card companies over the past several years, and you will find that they have received far more in interest, fees and late charges than you ever borrowed!

On Credit Law Network, I wrote an article touching on the ways credit card companies compound interest charging far more than the stated simple, 10% (or the like) that they advertise.  For that article I assumed a simple interest rate of 10%.  In reality, most people who come into my office for bankruptcy advice, have credit card interest rates of anywhere from 19% to 33%!  At those rates, the money owed on one credit card can double in just over two years (even without the addition of late charges).

So, when you borrowed $100 from the credit card company for that dinner out two years ago, and are now feeling guilty about not repaying it, think about how much you have paid to the credit industry during those two years. I’ll bet its way more than you ever imagined!

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Douglas Jacobs is a California bankruptcy attorney and partner in the Chico law firm of Jacobs, Anderson, Potter & Chaplin. Since 1988, Mr. Jacobs has taught Constitutional law and Debtor-Creditor/Bankruptcy law at the Cal Northern School of Law. He has served as Dean of Students since 1994. He is a frequent lecturer on the subject of consumer bankruptcy law, and has spoken at both state and national levels.
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