Credit cards have many benefits: flexible financing, reward programs, and the opportunity to earn welcome bonuses and credits. But their perks aren’t valuable if you carry a monthly balance. Carrying a large balance month to month results in high interest charges, making it harder to repay what you owe. And if you fall behind on payments, you’ll also be on the hook for late fees.

Here are some telltale signs your credit card debt is unmanageable, the potential consequences of too much debt, and some strategies for paying it down.

How much credit card debt is too much?
Your credit utilization and the percentage of take-home pay you spend on debt could offer some insight into whether your credit card balances are too high. Here’s what to know.

High credit utilization
Your credit utilization is the amount of revolving credit you use relative to what’s available to you. Revolving credit includes things like credit card balances and home equity lines of credit (HELOCs).

For example, let’s say you have $15,000 in total available credit across all your cards, and your outstanding balances are $5,000. In this case, your credit utilization would be around 33%.

Generally, experts recommend a credit utilization below 30%, though lower than that is even better. A low credit utilization typically means your debt is more manageable, whereas a high utilization could mean a heavier burden. If your credit utilization is hovering at 30% or even higher, it could mean your monthly debts are becoming burdensome.

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Forever 21 filed for bankruptcy protection for the second time in six years last week. The retailer’s operating company is expected to cease all operations in the U.S. and has already begun liquidation sales at its more than 350 locations, but it’s still open for bids if a buyer is willing to take on its inventory and keep running its stores, court filings show.

Forever 21 has been seeking a buyer for several months and made contact with more than 200 potential bidders, 30 of which signed confidentiality agreements, but no viable deal has come together, court papers say. CNBC previously reported the operating company was in talks with liquidators and would have a hard time finding a buyer for its business. The company’s bankruptcy comes six years after it emerged from its first filing only to face the Covid-19 pandemic, the highest inflation in decades, and new competition from Chinese-founded upstarts like Shein and Temu.

Bankruptcy cases fell in 2021 after falling in 2020.  Consumers who were over their head in debt and distressed businesses submitted 434,540 bankruptcy filings through September, 2021.  That’s an almost 30% drop from the 612,561 bankruptcy cases filed at the same point in 2020. And even that number was also lower than the 776,674 bankruptcy cases filed in 2019.

Increased government benefits throughout the year — such as third round $1,400 stimulus checks, supplemental jobless benefits and monthly child tax credit payments — were one reason for the drop.  So were eviction moratoriums, including a now-lapsed federal halt on evictions. The year-end report also pointed to “state lockdown orders that decreased personal expenditures.”

“There are many forces that are pushing people to not file bankruptcy right now and definitely throughout 2021,” said Professor Pamela Foohey, a consumer bankruptcy expert teaching at Yeshiva University’s Benjamin N. Cardozo School of Law.  Before bankruptcy, Foohey said it can take people around two years of financial struggle that ends with a crisis like an eviction notice. But it’s unclear when the clock on that struggle might be occurring in the current context, she added.

 

Because everyone’s situation is different, it makes sense to work with a bankruptcy lawyer to determine the best course.  Walker puts it this way. “You are the CEO of your company,” he said. “You have to take responsibility of what you do, and you have to be on top of it.”  This means surrounding yourself with professionals that can help you be successful.

DALLAS (AP) — A federal judge dismissed the National Rifle Association’s bankruptcy case, leaving the powerful gun-rights group to face a New York state lawsuit that accuses it of financial abuses and aims to put it out of business.

The judge was tasked with deciding whether the NRA should be allowed to incorporate in Texas instead of New York, where the state is suing in an effort to disband the group. Though headquartered in Virginia, the NRA was chartered as a nonprofit in New York in 1871 and is incorporated in the state.

Judge Harlin Hale said in a written order that he was dismissing the case because he found the bankruptcy was not filed in good faith.

“The Court believes the NRA’s purpose in filing bankruptcy is less like a traditional bankruptcy case in which a debtor is faced with financial difficulties or a judgment that it cannot satisfy and more like cases in which courts have found bankruptcy was filed to gain an unfair advantage in litigation or to avoid a regulatory scheme,” Hale wrote.

The NRA declared bankruptcy in January, five months after New York Attorney General Letitia James’ office sued seeking its dissolution following allegations that executives illegally diverted tens of millions of dollars for lavish personal trips, no-show contracts and other questionable expenditures.

Senator Warren and Congressman Nadler have introduced the Consumer Bankruptcy Reform Act designed to be the biggest change to the U.S. Bankruptcy Code since the Bankruptcy Abuse Prevent and Consumer Protection Act of 2005. It has not yet passed to any committee for review and is unlikely to be enacted into law as now written.

Primarily, the CBRA would abolish the existing regime for consumer bankruptcies under Chapter 13 and create a new Chapter 10 for individual and small business bankruptcies that will operate somewhat similarly to a Chapter 11 reorganization including a repayment plan to be approved by the Bankruptcy Court.

The CBRA would create a homestead exemption in bankruptcy that would be equal to 50% of the value of the conforming loan limit (as determined by Fannie Mae and Freddy Mac) of a single-family residence within the particular county of the debtor’s residence, or 75% if the debtor is age 65 or older. This would be a very substantial change for folks living in states with minimal or smallish homestead exemptions. It will also do away with the Means Test and eliminate some of the paperwork now required to file.  We will keep you informed of its potential progress though congress.

This year, Neiman Marcus and J.C. Penney joined the ranks of some of the biggest retail bankruptcies on record, including Sears, Toys R Us and Circuit City.

Neiman Marcus, J.C. Penney, Ascena Retail Group and Tailored Brands have now joined the ranks of some of the all-time biggest retail bankruptcies on record — including Sears, Toys R Us and Circuit City.

Continue reading “The 10 biggest retail bankruptcies of 2020”

If you are even considering declaring bankruptcy, then you are probably not in a very good place, financially speaking. Despite this, you may be dreading declaring bankruptcy because of the negative connotations that bankruptcy has. However, you should not be afraid of bankruptcy, because it can have many positive benefits for your financial future.

Continue reading “Five Ways Bankruptcy Can Improve Your Financial Future”

The number of large businesses that have gone bankrupt in 2020 has increased by 84% compared to the same time period in 2019, according to a recent study. This increase in the number of big business bankruptcies is blamed largely on economic disruptions caused by the coronavirus pandemic. This trend goes to show that even very successful companies can still be at serious financial risk when unforeseen circumstances arise.

Continue reading “Big Business Bankruptcies Up By 84% in 2020”

If you are dealing with financial troubles and struggling to keep up with overwhelming debt, bankruptcy may seem like an appealing option to you. After all, bankruptcy can allow you to get rid of most or all of your debt, and protect you from foreclosure or eviction from your home. However, bankruptcy is not something to be undertaken lightly, and it can be more beneficial for some than others. 

Continue reading “Five Things to Consider Before Seeking Bankruptcy”