Fixing the mortgage mess (blog post by Illinois bankruptcy attorney Andy Miofsky) will not end our debt problems.
The $950 billion dollars of credit card debt is in the process of melting down, as outlined in this linked Business Week article.
Consumers have already been hit with rising interest rates, even as the Fed lowers its rate to 1.5%. This should equal big profit margins for the credit card companies, but, they are way over-extended.
As with the sub-prime mortgage market, there is sub-prime credit card debt. Much more of the credit card debt is sub-prime. And that debt is not backed by collateral, while mortgage debt is backed by a home.
Even though home prices have declined, as noted by Detroit bankruptcy attorney Kurt O’Keefe, they are worth something. There is no collateral for credit card debt.
As with sub-prime mortgages, the credit card companies claim to be working things out with customers. More often, they just slap that penalty interest rate, 30% or more, as soon as you miss a payment or make some other mistake.
Being that the credit card companies wrote the credit card agreement, it is one-sided.
They define a default in the agreement, which could be missing a payment on another debt, a decrease in your credit score, et cetera.
Congress has legislated some credit reforms, (post by Maryland bankruptcy attorney Brett Weiss) and others are pending.
The old advice is the best, pay off the balances every month. If you cannot, pay off the higher interest rate cards first.
Look for more headlines of disastrous losses by the credit card companies on the credit card debt they pushed on everyone. Sending cards to college students they knew did not have income, (as noted by Pennsylvania bankruptcy attorney Steve Ott) is just one example.
And, follow what your representatives in Washington are doing about credit law reforms.
I do not hold my breath on waiting for good things from the government. I would rather bring my client’s case to a jury, and let the people decide.
