One of the primary reasons why many people seek the financial lifeline offered by either Chapter 7 bankruptcy or Chapter 13 bankruptcy is credit card debt. The reasons behind the accumulation of significant credit card debt vary, but often include loss of a job, divorce, prolonged illness, and perhaps a misunderstanding of the terms governing credit cards.

Specifically, consumers may not fully comprehend the consequences of making a late payment or no payment at all, or how only paying the minimum balance while still accumulating a large amount of debt may not be the most prudent move. Indeed, the White House has recently quoted a national study that demonstrates roughly 66 percent of credit card holders don't have a firm grasp of their cards' terms.

Interestingly, the Consumer Financial Protection Bureau (CFPB) -- created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and which commenced operations this past summer -- is currently testing a credit card agreement prototype that is designed to do away with incomprehensible legal jargon, and instead provide consumers with clear and concise information regarding costs, terms, etc.

The prototype is being test marketed at the Pentagon Federal Credit Union -- one of the largest credit unions in the U.S. -- over the first half of the 2012. Here, the majority of applicants will receive the new version of the credit card agreement -- shortened to just over 1,000 words -- while a smaller percentage will still receive the existing credit card agreement. After the six-month period, the CFPB will examine consumer feedback on both forms.

Thus far, the CFPB has indicated that it is not planning to make the prototype mandatory for credit card companies. However, depending upon the results of the test study and the feedback provided by the general public (the agency is seeking comments through its website), the streamlined credit card agreement may soon become the norm.

The following post is for informational purposes only and is not to be construed as legal advice.

If you would like to learn more about Chapter 7 bankruptcy or Chapter 13 bankruptcy, take the time to speak with an experienced legal or financial professional.

Stay tuned for further developments from our Phoenix bankruptcy blog ...

Source:

Bloomberg BusinessWeek, "A simpler credit card agreement is getting a tryout" Dec. 7, 2011