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Are credit cards the next collapse?

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posted on Oct, 29 2008 @ 01:58 PM
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Originally posted by whiteraven
How can they live this large on 60k????

They have to be in debt big time or are they crack dealers?!



I don't know, I can only speculate. The woman's mom died a few years ago; maybe they got a little inheritance, but not in the millions; also her dad is still alive.

The husband is a Border Patrol officer. I suppose it's possible he has his hands dirty but I doubt it; they are squeaky-clean people who live a really wholesome, if excessively materialistic, lifestyle. With overtime and such it's possible they make $75,000.00. But there's no way they can afford what they are doing unless they are continually borrowing or are into something illegal.

From talking casually with the wife I get the idea they are really, really, really in debt. How foolish! Yet they are not alone. Most of America is like this.




posted on Oct, 29 2008 @ 02:06 PM
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Originally posted by Aggie Man
Lord, I hope so! I would love the opportunity to pay back my credit card debt at pennies on the dollar...


Dont hold your breath on that one. If there is a bailout it will be for the companies. They will get a handout from the taxpayer, AND they will still pursue those same taxpayers for that debt.

After all, the people who defaulted on their mortgage debt did not get to pay off their bad debt at pennies on the dollar. They just lost the homes and now are carrying the default on their credit history. And, depending on state law, they may be liable for more money even after losing the house;

www.searchlightcrusade.net...


You see, because the lender took a $90,000 loss, they want to write it off on their taxes. And in order for them to do this, they have to hit you with a form that says you got away with $90,000 from them. This is taxable income!. So the IRS comes after you for the tax on the $90,000. IRS liens are one of the things that is not discharged by bankruptcy, and it stays with you forever. Ten years absolute minimum for any purpose. Sometimes your lawyer, CPA or Enrolled Agent will get you an "offer and compromise" that cuts your liability, but that's technically taxable income also and may be subject to another round of this crud. It it seems like to you the system is rigged so you can't win, you're right. The loan was an obligation you agreed to, and took the money for, and taxes are on obligation of anyone who is a citizen or resident.


None of the bailouts are set up to help you the little guy. They are only structured to help the big guys. If you default on your debt there is no Congress riding up on a whiter charger to save you. Bailouts for the big guys are another form of trickle down economics. Sold to us on the premise that if we bail them out things will be better for us.



posted on Oct, 29 2008 @ 02:11 PM
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Originally posted by Illusionsaregrander
After all, the people who defaulted on their mortgage debt did not get to pay off their bad debt at pennies on the dollar. They just lost the homes and now are carrying the default on their credit history.


So if I default on my credit cards, I will lose them? OH NOOOOOOOOO!
...unless, perhaps, I chain myself to them


EDIT: to add one point here though is this--> When you default on a mortgage, there is real property that they can take and resell. When you default on your credit cards, they have nothing they can take from you, thus the pennies on the dollar statement. They take pennies on the dollar ALL THE TIME in bankruptcy court!

[edit on 29-10-2008 by Aggie Man]



posted on Oct, 29 2008 @ 02:14 PM
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reply to post by Illusionsaregrander
 


This system is set up so crookedly that I would not be suprised if the banks go after the very people that sold the home and have the money in the first place! Old granny decides she is going to get rich by selling her once $$50,000 home for $350,000 to a young fine couple, the fine couple default on the bank loan, but good ole' sweet granny has all the money.



posted on Oct, 29 2008 @ 02:14 PM
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The husband is a Border Patrol officer
reply to post by OuttaHere
 


Ohhhhh! I see now.



Well, your and yours seem to be doing what every person should be doing. Cudo's.



posted on Oct, 29 2008 @ 03:26 PM
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Originally posted by Aggie Man

EDIT: to add one point here though is this--> When you default on a mortgage, there is real property that they can take and resell. When you default on your credit cards, they have nothing they can take from you, thus the pennies on the dollar statement. They take pennies on the dollar ALL THE TIME in bankruptcy court!


Thats true, if you dont mind having bad credit and having that impact your employability you absolutely can run up credit card debt and default on it. Although declaring bankruptcy can still result in your losing material possessions. And, now you have to prove you "deserve" bankruptcy.

www.ftc.gov...


Another major change to the bankruptcy laws involves certain hurdles that a consumer must clear before even filing for bankruptcy, no matter what the chapter. You must get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief. You can find a state-by-state list of government-approved organizations at www.usdoj.gov/ust. That is the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees. Also, before you file a Chapter 7 bankruptcy case, you must satisfy a “means test.” This test requires you to confirm that your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program at www.usdoj.gov/ust.


However being able to default on your individual credit card debt via bankruptcy is nothing new, so I did not assume you were talking about that in the context of this thread about the emerging possibility of the collapse of the personal credit collapse following the housing one.



posted on Oct, 29 2008 @ 03:37 PM
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reply to post by Aggie Man
 



Don't forget that the Government can garnish your wages if you also owe taxes on your forclosed home that was resold by your bank, double jeapardy IMO.



posted on Oct, 29 2008 @ 03:58 PM
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Here's the real kicker. Whenever you use a Visa or Mastercard, the RETAILOR must pay between 2%-3% of the transaction to the credit card company.

Think about that. Even if you spend $100 a month on a credit card, and pay it off before it gathers interest, they've earned 2% for the month (at least). In other words, they are making 24% (minimum) per YEAR on that $100.00 a month that you pay off every month so there is no interest charge.



posted on Oct, 29 2008 @ 04:03 PM
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Originally posted by sir_chancealot
Here's the real kicker. Whenever you use a Visa or Mastercard, the RETAILOR must pay between 2%-3% of the transaction to the credit card company.

Think about that. Even if you spend $100 a month on a credit card, and pay it off before it gathers interest, they've earned 2% for the month (at least). In other words, they are making 24% (minimum) per YEAR on that $100.00 a month that you pay off every month so there is no interest charge.


That is why Gas Stations hate it when you pay using a credit card and don't buy chips and drinks in their store. Some stations even charge more if you use your credit card so look out.......Credit Cards AND ATM cards make the banks money, thats why they push credit on everyone, look at their ads.......



posted on Oct, 29 2008 @ 04:12 PM
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Originally posted by 38181
reply to post by Aggie Man
 



Don't forget that the Government can garnish your wages if you also owe taxes on your forclosed home that was resold by your bank, double jeapardy IMO.


Not if you get paid in Cash.
Always remember that!



posted on Oct, 29 2008 @ 04:18 PM
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reply to post by Illusionsaregrander
 


hmmm....bad credit for 7 years vs 50K in credit debt???? not a bad trade off (note, 50K is not my personal debt...just throwing a # out there for arguments sake).

Also, I was not implying anything about bankruptcy, only illustrating that credit card companies take pennies on the dollar in bankruptcy court, so why not accept it on bad debt, or if the credit card companies were in financial need, as the title of the thread suggests?

I know this for a fact....lets say joe plumber owes me 1000 and I am in desperate need of cash...would I be willing to accept 800 as payment in full in a moment of need? you bet your bottom dollar....would I be happy about it? No way, but happy and willing to accept are 2 different beasts.



posted on Oct, 30 2008 @ 09:38 AM
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Originally posted by Crakeur
I was talking to a relative about this a couple of weeks ago. He used to work at American Express and still has plenty of contacts inside the company. They're seeing a frighteningly large number of delinquencies from their platinum and black card holders. I'm not sure of the numbers but he said that he was given the impression that the issue was rather large. and growing.



current headline on CNN.Com

developing story: American Express, hammered by the credit crisis, says it will slash 7,000 jobs as part of a drastic cost-cutting initiative.

American express has recently started telling their customers they now have credit limits. They never did this before.

Banks are closing up unused helocs. I received a letter from a mortgage broker I do business with and in his newsletter it says that many banks are telling people that their $100,000 line of credit is no longer available. If they only used $25,000 of it, they are capped at $25k.

when the banks take back the credit and the credit cards start limiting your credit, to amounts smaller than what they previously agreed to, you are going to find more people in a bind.



posted on Oct, 30 2008 @ 09:39 AM
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You really have to wonder who's running the show when some gutless, faceless insolent little puke in an offshore 'call center' can pull off something like this at the drop of a hat.

While this is a UK story, it does make one think . . . I wonder how much of the bail out money (our tax dollars) will actually flow out of the country as banks continue to set up these call centers in foreign countries because they can recompense these folks a fraction of what they'd have to pay those who staff a similar operation within our 50 states?



posted on Oct, 30 2008 @ 12:21 PM
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reply to post by GoalPoster
 


Lol, I know people who would deserve that royally. There are quite a few people who vent their frustration on service employees knowing that the poor soul cannot do anything back.

I empathize with the call center employee on this one, I am going to bet Mr. Bates is quite the pain in the butt to deal with. After all rather than being grateful (or at least content) the bank made all right, Mr. Bates is still whining and threatening and that tells me that his personality is less than pleasant generally.

In addition, if the call center employee follows rules, such as not changing a limit twice in one day, why penalize them with a bad review? Master Bates sounds like an all round vindictive sort, and when people like that run up against someone who has had their fill of abuse, stuff happens.




[edit on 30-10-2008 by Illusionsaregrander]



posted on Oct, 30 2008 @ 01:22 PM
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Credit Cards *are* next - and now, too as BofA chairman noted. BofA bought MBNA which had really low default/chargeoff rates. But BofA also had other cards to mix-into their portfolio. Now, we see today's news that Amex is releasing 7000 employees (that's a start...) to save on expenses due to the losses. This is only the beginning. The recent drop in the stocks is only a start as well. Credit has to flesh out all around the world - it'll be like shock waves feeding back on themselves.

Could be real interesting in the next year or two.



posted on Oct, 31 2008 @ 12:25 AM
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Yahoo

Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.

The new pilot program -- which the banks hope will become permanent -- could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent.


Wait, the banks want to HELP people struggling under credit card debt now?? What's going on here??

Oh, wait..

And there would be a tax benefit. Borrowers would be able to defer payment of income taxes they owe on the forgiven part of the debt until after the remainder was paid off. The lenders could wait until then to book their loss on the forgiven debt.

Tax benefits. And the banks in trouble can slowly add the writeoffs to their books rather than taking the hits big and hard right now.



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