Credit card companies offer credit to their customers for their purchase through plastic credit cards. The customer has to clear their debts within a stipulated period, failing which the client has to face the consequences of penalty and heavy interest rates. Defaulters are penalised seriously. Non payment on time leads to late payment to a tune of ten US dollar up to forty US dollars. Apart from payment of fine, credit scoring also is affected due to behind schedule payment. Payment after the due date is termed as ‘default’. Universal default refers to creditors increasing the interest rates universally it is applicable also to customers who pay on time. Even regulars are dealt with severely for the cause of a nonpayer. Credit card debt help data shows that in July, 2008 the debt statistics were around $962 billion in the United States. In the United Kingdom it was around $55 billion in July 2004. Australia also follows with its debt figures on credit cards moving to $41 billion dollars.

Credit card debt has become a growing menace day by day. For instance in the United States an individual who has completed his graduation has a credit card owing of nearly two thousand dollars according to recent surveys. The greatest anxiety of the day is bankruptcy. Many customers file for insolvency due to exorbitant late fees, elevated yearly percentage rates and universal default policy. A customer unable to clear their debt affirms bankruptcy. The credit card company has to pay all their debts in case a client states bankruptcy. There are instances where the creditor disputes the charges. At times the court blocks the debt on legal ground in spite of pleas by the creditor. Most of the companies offer deals to the customer to overcome possible insolvency by the client. The vested interest is that the company cannot bear the loss by paying the customer debt as it will eat into their profits. The arrangements offered are lower annual percentage rates and cutting on late fee and fine amount. The whole transaction is seen as a late financial statement by the creditor.

Credit card companies are striving hard to intensify the bankruptcy law by putting forward petitions to create tougher conditions to cancel debt arising due to credit card defaults. According to a recent analysis it is felt that credit cards debts are being cleared regularly due to strict reframing of bankruptcy laws. Germany is the worst hit when it comes to bankruptcy as until the year 2000 they did not consider these laws as significant to clear debts. Compared to the United States, Germany has higher credit card debts. This lack of interest in hardening the bankruptcy laws has cost Germany heavily with debtors struggling to overcome their debts. Clear amendments need to be made to solidify the insolvency laws to benefit both the customers and creditors alike.