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What Are My Options Other Than Filing Bankruptcy to Help Me Reduce the 25% APR on My Bank of America Credit Card? – Bobby

Bobby

“Dear Steve,

I’m a college student, age 22, and have trouble reducing my credit card debt due to the high interest rates. I have nearly reached my credit limit of $5,000 with my Bank of America Credit Card due to the apr of 25%. My credit score has been reduced to poor due to a few late payments (3) and have had overlimit fees charged thus increasing my rate.

I’ve since been paying on time with at least 20% more than the minimum amount (i.e. paid $200 for a $153 BofA bill), but I can’t continue to pay like this through 2009.

What are my options other than filing bankruptcy to help me reduce the 25% apr on my credit card and/or my debt level?

Thanks for your consideration.

Bobby”

Dear Bobby,

It would be a shame to see you go bankrupt over just one card. My suggestion would be to first try a debt management plan and work out a new payment plan. If you enroll in a debt management plan Bank of America will probably reduce your interest rate to 7% after a few payments. Click here for debt management information.

The downsides of this approach is that it will close your card, but it is maxed out anyway. And a comment could be made on your credit report that you are working with a credit counseling or debt management company, but your credit report is dinged anyway from the late pays.

The debt management approach will eliminate any more overlimit fees as well so that sounds like the most logical place to start.

Steve

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

3 Comments

  • We went to a bankruptsy attorney who told us we would have to file chapter 13 and pay all the money back + 10% to the trustee. We are about $130,000 in debt. We make about $165,000 before taxes, but I have borrowed from my retirement and have to pay it back which is $2,000 a month. Our house payments are about $4000. We tried to explain that we could not afford such a bankruptsy payment of $2800 a month. I had our payments worked out lower than that before I went to the attorney. I thought chapter 13 gave you relief and you only had to pay back a fraction of what you owe?

  • We went to a bankruptsy attorney who told us we would have to file chapter 13 and pay all the money back + 10% to the trustee. We are about $130,000 in debt. We make about $165,000 before taxes, but I have borrowed from my retirement and have to pay it back which is $2,000 a month. Our house payments are about $4000. We tried to explain that we could not afford such a bankruptsy payment of $2800 a month. I had our payments worked out lower than that before I went to the attorney. I thought chapter 13 gave you relief and you only had to pay back a fraction of what you owe?

  • If you want debt relief with asset protection you should prepare and get informed about your options and alternatives to bankruptcy. Bankruptcy is a form of protection against your creditors that seeks to combine all collection efforts under one assault attack ordered by the courts. We have found that it is by far easier to avoid bankruptcy and argue with creditors claims on a individual basis then as a whole. Arguing collection efforts on the individual merits can allow you to maintain control of your situation while protecting your assets (in bankruptcy you give your assets to your creditors) and by helping you avoid harassing threatening bill collectors until you are ready on your own time to pay and negotiate the best terms possible at a fraction of the original amounts owed.

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