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Credit card pitfalls could signal the need to file bankruptcy

Every single day, some New Jersey residents looking to buy their first home are turned down by lenders. The reasons for the denials could be a warning sign that they are in -- or headed for -- serious financial trouble. These individuals could be at a tipping point where bankruptcy protection may offer an effective means for regaining financial stability.

Many believe that because they are able to manage the minimum monthly payments on their credit cards, they do not have financial issues. Even if some of those payments are late, or an occasional payment is missed, an individual may not see what the mortgage lender apparently saw with regard to his or her financial situation. When a budget is stretched thin and a person is forced to eliminate luxuries and cut corners wherever possible, it may be time for corrective action.

Another pitfall that could give a person a false sense of financial security is continuing to use credit cards even though it is becoming increasingly difficult to make the payments. This may be okay for a while or in an emergency, but when the cards are maxed out, the real trouble may begin. Further, applying for more credit cards in order to transfer balances or make up for budget shortfalls is another warning sign. Mortgage lenders are trained to recognize the signs that a person may be in financial distress even if he or she does not yet know it.

Some New Jersey residents may believe that only people who have bill collectors calling every single day are overwhelmed by debt. However, those individuals were also once able to pay their bills. Obtaining an objective opinion could be beneficial in assessing one's financial circumstances and exploring options for eliminating debt. In many circumstances, bankruptcy relief provides a pathway for achieving financial security once again.

Source: U.S. News and World Report, "5 Credit Card Mistakes That Could Keep You From Getting a Mortgage", Lindsay Konsko, Jan. 12, 2015

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