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Living Paycheck to Paycheck: Credit Cards are to Blame

Affordable bk

Living Paycheck to Paycheck: Credit Cards are to Blame.

Credit cards are one of the leading causes of why people in America are living paycheck to paycheck. Credit cards have greatly contributed over the last 30 years toward the mentality that leads to living paycheck to paycheck.

Credit cards: Spending Money Before You Receive It

Living paycheck to paycheck has always been a problem for people who have strapped budget due to their limited income potential. However, credit cards have greatly intensified this problem: it gives the ability for people to spend their money before they earned it. The very premise of a credit card is that anything can be purchased at any time without restriction. There is no loan approval process or any other hurdle toward spending instantly according to your desires.

Spending Money Before You Earn it Leads to a False Impression of Financial Realities

Because the premise of absolute financial freedom is planted in the mind by credit card usage, this generates a false financial reality. Families that could otherwise have very balanced budgets and sizable savings, are falsely led to believe that they can operate with large unnecessary monthly expenditures and absolutely no financial education or understanding. They have always been able to have anything they want and are preprogrammed to make large monthly payments on what ever they purchase. These payments are made into infinity with no plan for anything otherwise.

Credit Cards Destroy Normal Warning Signals: “We Are Fine Because We Are Doing What Everyone Else is Doing”

Normally this would send off huge danger signals such as you are wasting substantial portions of your income or are in imminent danger of losing everything you own because you have no equity in it.

However, because credit card usage destroys your true concept of financial reality, these signals are ignored or muted. To receive solace, the monthly payer looks around at his neighbors and sees that he has been doing similar things. In the monthly payer’s mind, there is no other financial alternative.

The Financial Alternative to Living Paycheck to Paycheck is Obvious: Dump the “Credit Card Mentality”

The financial alternative to the “credit card mentality” is extremely obvious: become financially savvy and live within your means. Just because you are able to live in a slightly elevated status because you over-leverage your life with credit cards and mortgage loans, does not mean that you have to instantly default to that very poor and self-destructive mentality.
File bankruptcy, acquire financial knowledge, and live according to reality instead of monthly-payment financial insanity.

Nothing is impossible: You can learn how to live on 30% of your income instead of 130% of your income. How much better would it be to live the same life-style on 30% of your income than 130%?

If you have solid income at this point of your life, take advantage of the time you have left. The alternative is to pay $100,000’s of “rent” to your credit card, mortgage, and other debt payments only to be left with nothing at the end of your working life.

Credit Card and mortgage companies want you to continue with some form of financial fantasy – as long as they can take your money. If you can bear to admit you’ve been taken and drop the credit company’s financial fantasy, you can finally break out of the system that has enslaved so many into the paycheck to paycheck trap.

If you need any help on rebuilding your financial status, give our office a call: we are here to help.


~Indianapolis Bankruptcy Attorney John F. Bymaster on Living Paycheck to Paycheck: Credit Cards are to Blame.

Hidden Credit Card Fees

 Hidden Credit Card Fees: The Last Straw for Consumers with Too Much Debt

Hidden Fees

Hidden Credit Card Fees:  The Last Straw for Consumers with Too Much Debt can be hidden credit card fees. When a family is barely hanging on to pay their bills many times they make a payment late on one of their credit card accounts. This can trigger a series of hidden fees that can be disastrous for your financial situation.

That Late fee: The Ultimate Credit Card Trap

Credit card companies seem to be able to get away with financial “murder” if you are late on one of your credit card payments. Late fees assessed against you monthly can range anywhere from $10 to even $40 depending on the situation. However, late fees are the least of your worries when you are slow to pay a credit card account. Most credit card companies have an interest rate that is contingent upon the continued, on-time payment of the credit card and the state of your credit score. Therefore, it is very possible that only one or two late payments on one credit card could not only increase the rate on that credit card but your interest rates on all of your credit cards.

This across-the-board increase of interest rates on your credit cards can be catastrophic when your budget is already tight from your current debt load. Such an increase of interest rates can make your budget simply impossible.

Cash Advance Fees: The Subtle Budget Destroyer

A cash advance fee is a special fee that is charged when you take cash from a credit account instead of making purchases. Although there is little discernible difference between a cash advance and a purchase, the rates in which you were charged for cash advances are set into a separate interest accounting. Where you may only be paying 6% interest for purchases you may be charged up to 20% or more for cash advances. Therefore, cash advance fees can quickly overload a monthly budget by greatly increasing the amount that you must repay your credit card company monthly.

The Balance Transfer Fee Trap

Although many credit cards give interest rate and other incentives to transfer a balance to their credit card, other credit card companies many sometimes charge a much higher interest rate or large fees in order to transfer the balance. If you are consolidating your credit cards or transferring a balance, it is important to note both the fees and the future interest rate. A miscalculation on this part can be very costly and destroy your budget.

Fees On Top of Fees: Your Credit Card Companies Do Not Care if Your Budget Will Not Add Up

Credit card companies many times make what would seem to be a mistake. By increasing fees or interest rates beyond the debtor’s ability to pay, the credit card companies could be “shooting themselves in the foot.”  Where payments in the past were possible, now payments with the new interest rates and fees are absolutely impossible for the debtor.  However, it is very important to note that credit card companies do not care and do not usually have a system to anticipate this overcharging. Many times the overcharging of fees and the increasing of interest rates are the very catalyst that cause credit card holders to be forced to file bankruptcy.

Conclusion: Use Credit Cards Responsibly to Avoid Bankruptcy

Credit card companies operate for one purpose: to make profit off their credit card accounts. It is very important to make a solid plan to avoid getting into excessive credit card debt. Even a very well managed credit card portfolio can very quickly unravel into a mess that may be impossible to rectify without filing for bankruptcy. The best way to avoid unfair credit card fees or interest rates is to either not use credit cards or to use them as minimally as possible.

~Indianapolis Bankruptcy Attorney John F. Bymaster


Indianapolis Bankruptcy Lawyer John Bymaster also has a video explaining the different hidden credit card fees.


Time-tested Brands and Chapter 11: The New Norm?


Let’s discuss time-tested brands and Chapter 11: The New Norm?  Why are so many time-tested, brand-name businesses filing for Chapter 11?   Attention is focused on the Radio Shack Chapter 11 case pending with 9,000 jobs on the line.   Is Chapter 11 the best mechanism for saving a failing business?

The answer is usually “yes.”  Through the flexibility of Chapter 11, a business’s “ongoing” value can be salvaged in numerous ways.  When most people think about a Chapter 11, they understand Chapter 11 to be a reorganization of the existing entity.   The traditional understanding of Chapter 11 seems to be as such: (1) the same corporate entity, shareholders, and leadership will remain active and in charge, 2) existing secured debts will be reduced to market value and bad leases rejected, and 3) unsecured creditors will be paid at a dramatically reduced amount.   This scenario is a very common goal and outcome of Chapter 11.   But, a more “liquidation-type” scenario is many times much more appropriate and beneficial to the overall ongoing concern of all parties.

To salvage overall value and to prevent collective societal waste of resources, Chapter 11 many times is used to “liquidate” into a “reorganized” state.    This simply means that several “buyers” or “bidders” will come to the table to purchase different aspects (or the entirety) of the business in an auction-like scenario.  Many times, these “bidders” will desire to purchase the name of the business and continue operation with existing employees.   Other times, these bidders will choose to absorb or merge the companies’ resources into another company, creating a variety of “salvaged” scenarios.  Just because a Chapter 11 is moving toward a more liquidation route does not necessarily mean that the brand name or employment arrangements will not continue.

Remember cases such as American Airlines and Kmart where Chapter 11 saved these brand-name companies.   Kmart not only recovered from Chapter 11 bankruptcy but went on to purchase the Sears Corporation five years after their Chapter 11 bankruptcy filing.   Chapter 11 can be the only option powerful enough to save the value of a business and protect as many employees from losing their jobs as possible.

With our high-debt, ever-changing economy, these Chapter 11 filings – that are now so prominent and common place in the news –  may only be the beginning.   Our economy is encountering fundamental changes with technology and problems with over-dependence on complex debt systems: much greater overall “reorganization” is almost inevitably on the horizon.

– Indianapolis Bankruptcy Attorney John F. Bymaster