Yikes! Credit Card Interest Rates Can Go How High?

As a bankruptcy lawyer, I get to see a lot of credit card statements. Believe it or not, a lot of my clients have no idea what their interest rates are let alone how high they are until I bring it up. It is not unusual to see rates as high as 29.99%. The highest I have seen is 33% but I am sure there is higher. This got me thinking: How high can credit card interest rates go?

The Credit Card Accountability, Responsibility and Disclosure Act (CARD) of 2009 has great provisions that protect the consumer and force the credit card companies to give disclosures about debt. For example, one of the disclosures which really gets attention is the minimum payment warning and how long it will take to pay off your debt if only the minimum payment is made. See the photo above for an example of a disclosure. Paying just the minimum amount results in a monster profit for the lender.

While the CARD Act caps penalties, it strangely enough does not cap the maximum interest rate a credit card can charge. There is no maximum amount. None. It could go as high 44%, 55% or even 125%. The state I live in, Michigan, also doesn’t regulate interest rates. The card issuer can charge any rate at any time they want and it is completely legal. However, a lender must give a 45 day notice before a new rate increase and a borrower can choose to cancel the card and repay the loan at the lower, current rate.

While it is easier said than done, try to pay off your credit card each month to avoid paying any interest. If you are going to incur debt, consider getting a loan or a credit card from a credit union as their rates are capped at 18% by federal law. If it is too late for either of those options and your debt is quickly getting out of control, consider seeing a bankruptcy lawyer to find out how you can eliminate your credit card debt altogether.

“Y” also stands for:

Chris McAvoy is a Taylor, Michigan attorney and consumer bankruptcy lawyer who helps people file Chapter 7 and Chapter 13 Bankruptcy. To find out more about bankruptcy, click here for contact info. We help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, and the Downriver, Michigan area.

“N” Is For Notice To Creditors

N (Washington, DC)Creditors are entitled to notice when a debtor files for bankruptcy. Typically, by using a credit report, collection letters, and the debtor’s memory, all creditors are listed. The bankruptcy court then sends notice of the bankruptcy filing and the automatic stay to the creditors.

What happens if you forget to list a creditor?

If you have filed a Chapter 7 and there are no assets available for distribution to the creditors, then it doesn’t matter if they got knew about it or not, the debt is discharged. Letting them know after the case is over is sufficient. Our courts in Michigan (a 6th circuit state)  won’t reopen a case just to add a creditor. It’s a waste of time. There is a mistaken belief that the failure to list the creditor keeps the debt alive. Not true. It’s gone. This happened recently for an Allen Park client of mine. No worries though, I just sent notice of the bankruptcy even though the case was closed and that resolved it.

But you better make sure you list all your creditors.

While most Chapter 7 cases don’t have assets available for distribution, a small number do. In these cases, creditors are given notice to file a claim in order to receive a share of the proceeds. If the creditor isn’t listed, the trustee can’t give them notice to file a claim. If they don’t file, they don’t get paid anything. If the creditor is prejudiced by the debtor’s failure to list them, then that debt may not be discharged. Chapter 13s are very similar. All Chapter 13s are asset cases because a payment of some amount is made to creditors. Again, that debt may not be discharged by the debtor’s failure to list the creditor and the debt.

And there is no violation of the Automatic Stay if they don’t know.

If a creditor violates the automatic stay by continuing to collect on a debt after the case is filed, you can bring an action against the creditor which may entitle you to money damages. But if you didn’t list the creditor, how are they to know that you filed for bankruptcy? The automatic stay only prohibits collections by creditors that have actual notice. No soup for you.

“N” also stands for:

Chris McAvoy is a Taylor,  Michigan attorney and consumer bankruptcy lawyer who helps people file Chapter 7 and Chapter 13 Bankruptcy. To find out more about bankruptcy, click here for contact info. We help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, and the Downriver, Michigan area.

Creative Commons License photo credit: takomabibelot

“H” Is For Harassment By Creditors

HCreditor harassment, obnoxious phone calls to your house and job, lawsuits and garnishments overwhelm and stress people out. Ripping open your paycheck to see if there is a garnishment is not a good feeling.  Creditor harassment and debt collectors make ridiculous threats to get you to pay. Creditors say harassing things like they will have you arrested or they will take money from your bank account if you don’t start making payments.

Lies, goddamn lies, and creditors.

Here are some of my favorites:

The threat:

  1. You will be arrested if you don’t start making payments.
  2. They will take the money from your bank account immediately.
  3. Your check will be garnished this week.

The truth:

  1. Debtor’s prisons no longer exist. I assure you a cop is not going to arrest you because Visa said so.
  2. Your bank will only allow a creditor access if you give them permission.
  3. Garnishment will only happen after you have been sued and there is a judgment. Even then it will be a lawyer, and not a debt collector, doing the garnishing.

Having said all of that, threatening calls and letters is a symptom of a much bigger problem: You can’t afford to pay your debt. That’s the real problem. Whether it is because of job loss, wage reduction, overwhelming medical debt, the result is the same. There are only two ways I know of that are guaranteed to work to stop the collections. Either pay off the debt or file for bankruptcy protection.

Bankruptcy and the automatic stay.

Once you file for bankruptcy, the “automatic stay” kicks in. Your creditors are no longer allowed to contact you, write you, call you, sue you, garnish you, seize your property, etc. When you file your bankruptcy petition, all of your creditors are listed. The bankruptcy court mails notices to the creditors to inform them of the bankruptcy. If the contact continues, the creditor is in contempt of court and can be sanctioned for violating the automatic stay. In some cases, a debtor will be awarded damages and attorney fees for having to enforce the stay against the willful violator.

“H” also stands for:

Christopher McAvoy is a Taylor,  Michigan attorney and consumer bankruptcy lawyer who helps people in the  Downriver area  file Chapter 7 and Chapter 13 Bankruptcy. To find out more about bankruptcy, click here for contact info.