Although student loan debt has surpassed it nationally, people on average carry a lot of credit card debt. I see it most often as the driving force behind bankruptcies in the Gloucester County, New Jersey area.
However, problems can arise when people are "living on credit cards" to get by in a bad economy. It gets worse when it continues past the point where you are considering bankruptcy. Here's why.
It Can Be Considered Fraud in Your Bankruptcy
Fraud is more generally, and objectively, defined in the bankruptcy code. Under that definition, if you use the card at a time where you cannot afford to pay the bill (despite your good intentions) it is considered fraud.
Although creditors usually do not object because of the expense of doing so, if you rack up a significant amount of debt on any one card in the months leading up to your bankruptcy, it will be scrutinized. If the charges are for things other than the basics, it can lead to problems with wiping out the debt.
You Will Have to Stop Eventually
Once you file the bankruptcy, you will not be able to use the cards. Therefore, you might as well start getting used to not having them now. For an effective fresh start, you should adjust your income and/or expenses going forward, so that you are not deficit spending. Use debit cards for the convenience, and later secured credit cards to rebuild your credit, but you might as well cut up your credit cards now.
One of the benefits that often come out of bankruptcy for people is the realization of how much credit cards were their downfall. Thus having to walk away from them is a good thing, and a step towards a better financial future.
Later on, have one credit card and pay off the balance every month. It will help you rebuild your credit without your digging another financial hole for yourself.
So What Do I Do?
If you live in southern New Jersey and are thinking about bankruptcy, please call my office at 856-432-4113 or contact me through this site to schedule an appointment to discuss your options, and whether bankruptcy is right for you.
If you are looking for further information, please download my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey.