March 24, 2009
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News: The Congested Highway to Bankruptcy.
Things are getting more congested all the time on the bankruptcy highway. Especially, here in Tampa Bay. The reason? Credit card debt. Can you believe it? It used to be over medical care. There may be a link between the two and probably is. Doctors any more want either cash up front or credit cards. This bay area has already jumped 47% just over last year and studies are showing it's mostly because of credit cards.
Credit card debt seems to be taking the lead for bankruptcies over medical care though again, there may be a link. Just in one day last month, 47 bankruptcy cases were filed in the bay area and all but five of them were cases where residents were all owing five-digit figures on credit cards. One lady filing bankruptcy was living off a $660 per month Social Security check and was owing $103,000 to AMEX. Chapter 13 is not just some kind of panacea or bonanza for these people to ‘make a few extra bucks. In recent years, Chapter 13 rules have tightened up considerably when it comes to credit cards.
Even though many credit card debts are dischargeable under Chapter 13, many are not. Fraudulent activities are scrutinized heavily. Whacking the old credit card for cash advances shortly before filing (within 70 days) is one example that won't fly. How about luxury spending sprees or large purchases from the same merchant. Can't do it. Not if its within 90 days of filing. The credit card lenders can still come after you.
For whatever the reason though, there is a tendency for many of these people to rack up charges and take cash advances on credit cards shortly before declaring bankruptcy. Perhaps they're using the cash advances and diverting other purchases to credit just to pay medical bills. Perhaps not. Why couldn't they just pay the medical bills with credit cards in the first place?