One of the most common triggers for today’s bankruptcy filings results from people having significant credit card debt that they are barely able to make the minimum payments on. Everything goes along fine for months, maybe years, until suddenly–and frequently unexpectedly–the interest rates on their credit card(s) jumps from a very low (or zero) interest rate to over 22%! The main reason this happens is when the cardholder defaults on the cardholder agreement. This could be as simple as missing or being late on a payment, or more unexpectedly because you simply have too much overall debt.
My favorite story of the week comes from a debtor who had two credit cards with the same Bank. She was diligently making her monthly minimum payment to them, but mixed up the checks and put them in the wrong envelopes. One of the checks was insufficient for the payment on one account, so the interest rate increased resulting in a minimum payment she could no longer afford to make. She ultimately had no choice but to seek information on possibly filing a bankruptcy case.
I see, all too often, people skating by on the edge and it takes very little to push them to the bankruptcy precipice. A good warning sign is: If you are barely able to make just the MINIMUM payments on your credit cards, you should already be considering bankruptcy as an option because even if you continue making only the minimum payments, you will never pay off those debts because nothing (or only a negligible amount) goes towards the principal.
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