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Changing paradigm of plastic

By Cathy Moran

When politicians talk about credit cards, they conjure up images of consumer purchases, and often, of consumer spending run amok. However, the facts that I see in my bankruptcy clients show that credit cards are increasingly used to finance small businesses.

Entrepreneurs use credit cards in two ways: one is to buy goods and services for the business or cash advances to make payroll. The second way is more subtle: the business owner uses his personal credit to support himself in lieu of the salary he isn’t getting from the new business.

Too little attention is paid to the impact on business plans of funding at credit card interest rates. My sense is that it takes a dynamite business operation to retire a business loan carrying interest at 18-24%. Yet small business types resort to their credit cards because that is often the only money available. It further seems to mandate that if the business fails, the entrepreneur is personally exposed.

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About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Bankruptcy Basics

About The Soapbox

You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

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