Is Bankruptcy My Only Option If I Have A Lot of Credit Card Debt?

Does filing for bankruptcy clear credit card debt?

Credit cards are one of the primary driving forces behind bankruptcy. Whether you’ve made bad choices or you’ve had to choose but to utilize credit cards due to financial challenges, late fees, high interest, and other penalties cause people to experience great distress with credit card debt.

Bankruptcy can be an option to resolve credit card debt, but it isn’t the only thing you can do.

How Far Behind Are You on Payments?

The first thing to consider is how far along you are in the process. If you’ve let a payment deadline or two slip but you have the financial means to get caught up, there isn’t much to worry about. Credit card companies don’t even report past due payments until they’ve gone beyond at least 30 days.

If you tend to miss payment deadlines there’s a chance the credit card company will raise your interest rate. They can also apply late fees and other penalties. These can add up and lead to much worse problems, but you still have a chance to get back on track.

Once things progress beyond an occasional late payment, the credit card company might turn your account over to a debt collector. These are people who focus entirely on collecting payments and they tend to be very aggressive.

Debt Collectors are Aggressive

There are legal limits as to what they can do, but they tend to come as close to the line as possible between legal and illegal debt collection practices. You can expect to get calls at home and work. Your friends and family might receive telephone calls if you do not respond to their initial efforts to contact you. Eventually, they’ll take legal action and file a lawsuit asking the court for a judgment against you that allows them to be even more aggressive.

It’s usually at this point that people decide to check into bankruptcy. If the lawsuit is successful, it could result in wage garnishment or bank levies, making it difficult for you to catch up on your debt.

If you’re hoping to avoid bankruptcy, it’s important to act before a creditor or debt collector files a lawsuit. Options you have for dealing with credit card debt before creditors receive a judgment include:

Creating a new payment arrangement or negotiating a different due date for payment
Consolidating debts
Using a personal loan or other means to pay off credit card debt
Asking family members or friends for payment assistance
Using money from personal or retirement savings to pay the debts
Defaulting on the debt without concern for the consequences because you have no assets or income

Whether or not any of these is a better option than filing for bankruptcy varies from person to person. However, if you prefer none of these options, Chapter 7 bankruptcy is one of the most powerful tools available for dealing with oppressive credit card debt.

You Can Eliminate Credit Card Debt by Filing for Bankruptcy

Credit card debts are unsecured. This means they qualify for discharge when you file for Chapter 7 bankruptcy. Discharge means that once your case is complete, you’ll no longer be legally obligated to pay the debts. The bankruptcy court liquidates your assets if you have any. Then it repays your creditors using those funds. Once they complete that process your case is closed. You no longer owe the credit card company any money.

There are a few exceptions under which you’d still be required to pay credit card debts after filing for Chapter 7 bankruptcy. Creditors can file an objection which is an adversary proceeding. If granted, you’re still obligated to pay the debt.

Another instance in which credit card debt might not be dischargeable is when you used the credit card to pay for luxury goods within a short time before filing for bankruptcy. You can expect the court to look into all of your recent financial transactions. If you spent $675 or more on luxury goods three months or less before filing, the court can rule that debt is non-dischargeable.

Does Filing for Bankruptcy Clear Credit Card Debt

Bankruptcy is one of the most powerful tools available for dealing with credit card debt. It’s important to review your limitations with your bankruptcy attorney before you file to avoid unwanted scrutiny from the court.

To estimate whether you qualify for a bankruptcy, take the free bankruptcy calculator below!

If you’d like to know more about bankruptcy or you have a lot of credit card debt and you’re curious if bankruptcy could help you, we can help. Contact the Law Office of Robert M. Geller at 813-254-5696 to schedule a consultation.