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What you need to know about credit card debt

On Behalf of | Aug 16, 2022 | Credit Card Debt

There is a good chance that you have used a credit card to buy groceries, gas or furnishings for your Michigan home. Although access to consumer credit can provide you with financial flexibility, it can also saddle you with a balance that can be difficult to repay.

Credit cards are unsecured

An unsecured credit line is one that is not backed up by any type of collateral. If you default on your obligation to pay, a lender can’t foreclose on your home, take your car or repossess any other specific items. However, defaulting on an unsecured loan could result in a lawsuit. If a judgment is rendered against you, your wages could be garnished or funds in a bank account seized to pay what you owe.

What to know about credit card debt

Credit cards tend to have higher interest rates than personal loans or those that are secured by collateral such as auto loans or mortgages. Depending on your credit score and history, you could pay an interest rate of up to 29.99%. You can avoid accruing significant amounts of credit card debt by only using it for emergencies or by keeping your credit limits to a level that you can afford to repay each month. If you are having trouble staying current on a credit card balance, it may be possible to eliminate it through bankruptcy.

Ideally, you will avoid using credit cards if you can’t afford to repay the balances that you accrue in a timely manner. However, if you do accumulate a debt that you cannot afford to repay, it may be worthwhile to consider filing for Chapter 7 bankruptcy. In a matter of weeks, you may be able to fully discharge the debt without losing any assets.