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For those deep in credit card debt, compound interest is the reason it takes so long to pay off that balance. Compound interest is essentially “interest on interest,” meaning that you will pay interest charges on accrued interest. This might not sound daunting, but it makes it much more difficult to pay off this balance. If you are deep in debt, speak to a bankruptcy lawyer who can explain your options and help you make the best decision for your family.
Many credit cards actually compound interest daily, which adds to your balance. Let’s say a person has a $10,000 balance at an APR of 15%. This means that their daily APR is approximately 0.041%. So on day one, $4.10 would be added to the balance. On day two, the interest would compound on $10,004.10. Every single day, that balance slowly climbs up and up.
This actually gets worse if a person misses payments or falls behind on their bills. If there is a late fee, any payment is first applied to this fee, which means most (or all) of a minimum monthly payment would go towards the fee and none goes to the actual balance. The sad reality is that this credit card will never be paid off. Each month, a person will simply slip further and further behind.
But a creditor has options. If they qualify, Chapter 7 bankruptcy allows a person to discharge all their credit card debt. This gives a person room to breathe, allowing them to get out from under impossible debt.
Debt is very easy to get into, but extremely difficult to get out of. Fortunately, there are options available. At Westbrook Law Group, we can help you find the best option for you and your family, allowing you to get a fresh start free of crushing debt. To learn more, contact our office for a free consultation today.