Sometimes, a fresh start makes sense -- if you can get past what you think you know. Here's how bankruptcy affects your credit, your possessions and your karma.
Like most big, bad, scary things, bankruptcy has a reputation based on a few tidbits of truth and lots of embellishment. And like most creepy crawlies, it's not nearly as frightening once you know the truth.
With a mind toward declawing the monster, here are a dozen misconceptions about bankruptcy:
October 11, 2005
June 09, 2005
Your credit card payment just doubled
Three credit card companies have announced they are doubling minimum monthly payments on credit card balances from 2% to 4%. Others are expected to follow suit quickly. To some cardholders, that could be seen as a good thing. To others it could be devastating.
If you can handle the increased payment it's good. Let's face it, if you pay only a 2% minimum each month, your debt would probably last longer than most marriages. Doubling your minimum might put you back on the financial straight and narrow. Ostensibly designed to help consumers get out of debt faster, the increased minimums will force cardholders to pay off fees, interest and at least a portion of the principal each moth.
But if you simply can't make that doubled minimum month after month, it could put you and many other debtors in over your head.
January 05, 2005
Major Hassle for Capital One
Minnesota Attorney General Mike Hatch sued Capital One in state court on December 30, 2004, alleging false advertising.
Capital One's TV and mail advertising prominently features "low and fixed" interest rates as an inducement for consumers to switch balances from other credit cards. In fact, however, Capital One reserves the right to raise rates at any time and also will increase rates for late payments and negative credit reports. Consequently, the supposed "fixed rates" are in reality not fixed. The disclaimers are in tiny type not readily discernible by the consumer.
"It's very clear that these ads are designed for the sole purpose of getting people to believe that the rate is fixed and it can't change. It's consumer fraud." —Mike Hatch
The suit describes in detail Capital One's TV ads which compare itself favorably to supposed predatory competitors who raise rates unpredictably. Capital One, Attorney General Hatch alleges, does the same thing. He seeks an injunction and restitution.
December 16, 2004
Christmas Budgeting Guide
Brad Strohe of Freedom Debt Relief in San Mateo, California, cautions:
"During the holiday season, people throw caution to the wind and have less personal guilt about spending because it’s not on themselves. Our recommendation is to set a limit for a maximum amount you’re going to spend without regard to who you’re buying for, and for what purpose. Then make a list for the people you need to shop for and stay within the budget."
Credit Scores and Credit Counseling
Liz Pulliam is a well-known consumer finance columnist. In her recent column, Four Credit Scoring Myths, she states:
"The current FICO formula ignores any reference to credit counseling that may be in your file. That’s been true for the last three years, after researchers at Fair, Isaac, the company that created the FICO scoring system, noticed that people getting credit counseling didn’t default on their debts any more often than anyone else." (emphasis added)
It's good to know that Fair Isaac, the credit-scoring company, treats credit counseling as a constructive approach to debt problems.
For full article, see MSN Money (11/30/04):
From the mail . . .
First, let me tell you that you have been a godsend At the time we started your program we were deeply in debt and possibly headed for financial ruin and divorce. Since working with you, we have been able to work out our finances and actually created a budget and stuck to it. As it turns out, the solving of one problem gave us the confidence and ability to work out all of our other problems.
I hope that with the Lord's help and our determination that we will never find ourselves in this predicament again. Thank you and God bless you all.
