Imagine a very commonplace scenario where “Jane” has nearly exhausted all her line of credit with a department store buying back-to-school supplies and clothing for all her children with the intentions of paying it off promptly as usual with a large bonus check she is anticipating. Jane has an automobile accident and is now faced with automotive expenses and medical bills which must take precedence over the department store card so she is forced to allow it to fall into default. Jane begins to rely on her lines of credit to cover day to day expenses as she attempts to resolve her financial obligations which are now being assessed late fees and higher interest rates. Jane is unaware that many third party lenders are smaller affiliates of a select group of very large lending institutions. Once these lenders catch wind of defaulted financing they will alert other lenders within their network and advise them to reevaluate Jane’s creditworthiness. Because of this behind-the-scenes infrastructure creditors are able to quickly cut their losses and cripple an individual’s finances when the borrower becomes confronted with very commonplace and unforeseeable occurrences that could happen to any one of us at any time.
A commonly overlooked area of concern regarding bankruptcy is one’s health and well-being. Stress is a major contributor to many health risks common among Americans and stress can tear a family apart if not managed properly. The mental anguish and physical effects of stress are very real and should not be ignored because of some misguided conception that bankruptcy signifies some sort of failing on your part. A MN Bankruptcy Lawyer is not a magic wand that away all of your financial obligations but it is there to help those who need it. And if the stress of your finances and the actions being taken against you by creditors is affecting your health and well-being there is no need for you to needlessly suffer. Relationships with friends and family can be dramatically impacted by stress and it is our belief that one’s health and happiness should not be compromised due to financial obligations and unforeseen expenses. Bankruptcy can get you the relief you need to get back your peace of mind and begin rebuilding your life.
It is important to have realistic expectations following your bankruptcy and an understanding of how to best utilize the financial tools at your disposal. MN Bankruptcy Attorneys will be able to help you eliminate most of your financial obligations but the Bankruptcy will be reflected on your credit report. Your debts that are discharged under your bankruptcy will be reported as paid but rather closed out through bankruptcy with a balance owing and in default at the time of filing. This can preclude you from many financing options extended to those whose credit is in good standing. Be aware that the astoundingly low interest rate your bank is promoting in their monthly news emails will likely be something you do not qualify for immediately. This does not mean we should resign ourselves to whatever higher rate is initially offered to us as some sort of punishment for filing bankruptcy. It is often a simple matter of speaking with a customer service representative or a loan officer to find out what the policies are regarding adjusting financing options. Many lending institutions have specific policies for those looking to reestablish credit. For example, one bank may finance you at ten percent interest and offer a reduced interest rate after 6 months of consecutive timely payments.
Subprime lending is something you will likely encounter following a bankruptcy. Because bankruptcy filings are public information predatory lenders can compile lists and solicit financing to you at inflated interest rates. They are fully aware that you are unlikely to qualify for financing elsewhere but there is a way to beat them at their own game. Interest is charged monthly so if no balance is carried from month to month there is nothing for the creditor to attach their fees to. One great way to reestablish your credit is to obtain one of these subprime credit cards and use it only for purchases you have the cash to cover at that time. You must immediately pay off your charges with the cash you would have initially used for the purchase before the billing cycle is completed and this will allow you to avoid the interest fees and rebuild your credit. To qualify for financing in the future you must reestablish your credit history but this doesn’t mean you need to carry a balance to do so; in fact this is ill- advised until you are comfortably on your path to financial recovery.
Another thing to be aware of when dealing with subprime lenders (or any lender for that matter) are monthly account fees or membership fees. These can be structured a number of ways but the most common fee structures are as follows: Yearly membership fees-These can vary greatly from reasonable to more than your line of credit automatically overextending your line of credit once they go into effect. Some yearly membership fees are applied to the card at the time of activation, for example, your line of credit may be $300.00 and your membership fee may be $200.00 meaning you actually only have a $100.00 credit line available to you until these initial fees are paid off.
Monthly account maintenance fees-Many financial institutions and lenders are now requiring monthly fees from their customers and the terms can vary greatly. Some offer to waive the fees if a certain number of transactions are processed in a billing cycle and these requirements can easily be satisfied by making smaller affordable purchases you can easily pay off. Some require a specific dollar amount to be financed per billing cycle and this can be done by making larger necessary purchases and immediately applying the cash you would have paid for these items with to the card before the billing cycle is completed. Knowing what to expect following a bankruptcy and having a plan to address these obstacles is essential to your recovery.
The MN Bankruptcy Attorneys at Kain & Scott are here to help and keep you informed. For information about Bankruptcy contact us for a FREE, no-obligation Bankruptcy Consultation today!