As we get closer and closer to the final implementation of the Bankruptcy Reform Act, many US citizens make a mad dash to their local attorney’s office. With good reason, as the Bankruptcy Reform Act will institute many changes that will ultimately make filing for bankruptcy a much more difficult task. But as you ponder the notion of a flood of bankruptcy filings, also keep in mind that many of the nation’s major credit card issuers are making changes to their guidelines that will cause monthly payments to rise and, in many cases, nearly are duplicated.
For years, minimum payments have been set at about 2% – 2.5% of a person’s total debt. So if you owed $10,000, you were paying roughly $200 per month. Now, with changing guidelines, a person could be required to pay 4% or more each month on their credit card debt. Using the same example, that would mean the same $10,000 debt would require a payment of $400 each month.
Although not an astronomical change, for those people who are living from minimum payment to minimum payment this could be a devastating blow to their wallets. Another thing to consider is that most people are unaware of this upcoming change, which means they may not be able to make that payment on time. As we all know, if you don’t pay on time, you will pay the fine.
Also keep in mind that charging a late fee is almost always accompanied by an interest rate increase. This 1-2 hit of credit card issuers has a disturbing moment about it. The government is going to make it harder for people to file for bankruptcy, and banks are making changes that could cause more people to need to file for bankruptcy. It’s not hard to see how these two changes together can, and very likely will, have a dramatic impact on the rest of the US and our commerce. No matter what the outcome, it’s pretty self-evident that timing is everything.
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