Consumer Credit Likely to Tighten

The Wall Street Journal reports that credit card companies are likely to restrict access to unsecured credit as a result of increasing delinquency rates and the general downturn in the economy.   Currently unused credit card availability exceeds $4 trillion, and banks are concerned that cash strapped consumers will turn to credit cards in the event of job loss or inability to access long term sources of credit like home equity lines or even car loans.

Presumably the credit card issuers fear that those turning to credit cards in bad economic times will be poorer credit risks, so you can expect to see reductions in lines of credit and less leeway in the event of a late or missed payment.

Attorneys who regularly represent debtors in bankruptcy cases know that it can be dangerous to rely on credit card purchases or cash advances to cover normal household operational expenses during tough economic times.  The Bankruptcy Code permits credit card issuers to challenge discharge if a debtor accesses credit without a “reasonable expectation of repayment.”  So, if you find yourself thinking about using credit cards to pay your mortgage, car payment, utilities or insurance, it might be wise to speak with a bankruptcy lawyer in your area before accessing short term credit.