Credit card debt

Credit card debt is another example of unsecured debt. Credit card companies spend millions of dollars trying to convince people all over the world to use credit cards. Credit cards used wisely can be a great help to manage short term cash flow shortfalls. Credit cards not used wisely can create a lot of problems since credit card companies main source of profits is from people who are late in their payments (i.e why some people compare credit card companies to loan sharks of the old days). On credit card debt they will usually charge you:

1. High APR
2. Late fees
3. Late payment penalty charges
4. Report it to the credit rating agencies.

Sometimes the late fees and high APRs are too much for the consumers to handle. In such cases the only option left for the consumer is to declare bankruptcy. Credit card companies are naturally wary of consumers declaring bankruptcy, as doing so forces the credit card company to forget the debts (and lose any potential income they could have gained.)

Hence the credit card companies usually are willing to offer a better deal to the consumers if they feel that they have pushed the consumer to the brink of bankruptcy. This better deal that thay offer to consumers usually consists of:

1. Reduced APR
2. Removal of past late fees and penalty charges.
3. Reaging the accounts so that the credit agencies see them as late accounts.

The credit card companies are also trying to make it very difficult for consumers to file for bankruptcy with their lobbying effort in the congress.