Should I File Bankruptcy for Credit Card Debt?

If your credit card debt is out of control, you may be wondering if filing bankruptcy for credit card debt is the right move. Before you file bankruptcy for credit cards in Chicago, you should understand the process. 

It can feel like you’re sinking into an abyss when you struggle to pay off credit card bills. The never-ending barrage of phone calls from creditors and the constant worry can sap your enjoyment of life. 

DebtPros is a law firm whose bankruptcy attorneys are dedicated to helping you get debt relief by helping you file for bankruptcy to get a fresh start. If you’re being harassed over credit card debt, a bankruptcy attorney can help. This informative article provides valuable information about filing bankruptcy for credit card debt to help you decide the next steps to take.

Understanding Bankruptcy and When It Might Be Right for Credit Card Debt

Filing for bankruptcy should never be considered seriously for credit card debt or any other type of unsecured debt. It’s also a big decision for any secured debts you may have. Bankruptcy filing can give you a clean slate and a fresh start, though when you declare bankruptcy, it is not free of consequences.

In other words, the old saying that there is no free lunch applies. There are other impacts that will be felt by filing bankruptcy, and it requires examining your specific situation to see if it is the right move for wiping out your credit card debts. It’s helpful to speak with an attorney who is familiar with bankruptcy laws and debt collection lawsuits before taking this step. 

Types of Bankruptcy Chapters Available for Consumers Who Are in Trouble with the Credit Card Company

There are essentially two choices for consumers who want to file bankruptcy due to out-of-control credit card payments. Your bankruptcy filing can be for Chapter 7 or Chapter 13, and it’s important to understand the differences between them before you start your bankruptcy petition. 

Chapter 7 – Best for Unsecured Debt

Chapter 7 may be best for credit card debt bankruptcy because it is an unsecured debt. With unsecured credit card debt, filing for Chapter 7 will require you to sell off some of your assets with the help of a bankruptcy trustee, allowing you to pay a portion of your debt. The rest of the debt will be discharged, and while this sounds like a great way to erase credit card debt, there are exceptions. 

If the amount on your credit card bill just before filing bankruptcy includes a large amount of unnecessary items that total over $675, you may not be able to clear those credit card balances. Only items that are deemed necessary for living would allow you debt relief in these circumstances. 

Additionally, Chapter 7 can’t erase credit card debt for any non-dischargeable debts such as back taxes, child support, alimony, or student loans. If you use your credit card to make these types of payments, you’d still be responsible for paying this type of unsecured credit card debt. 

Chapter 13 – Reorganize Your Debt

With Chapter 13 for credit card debt, you can still keep your property; however, you will need to create a debt repayment plan as you restore your financial situation. If you make enough income, this is a better option for bankruptcy proceedings as you’ll restructure the debt and make payments for a period of three to five years. 

At the end of this period, the rest of your debt, including credit card debt, will be discharged. Chapter 13 may not be right for you if you can’t make consistent payments on your credit card debt. If you miss any of the payments your bankruptcy case can be dismissed and you will still need to pay your credit card debts. 

How to File Bankruptcy on Credit Cards and Clear Unsecured Debts

Before you begin the credit card bankruptcy process, you should understand how to file for bankruptcy. Keep in mind that when you have credit card debt and high balances, the credit card company will begin charging you higher interest rates along with penalties and fees. 

The credit card company may also turn your account over to a collection agency and then you will start getting threatening calls from a debt collector about your remaining balances. When credit card debt gets this far out of hand, it really may be best to file for bankruptcy. Once you do, those harassing phone calls will stop as it puts an automatic stay on any potential debt collection lawsuit and other actions, such as phone calls from creditors and collections.

Before you head to bankruptcy court over your credit card payments, you should consult an attorney to discuss getting your credit card debt discharged. Even though it is not a secured debt, your financial situation could worsen if you do nothing, as the credit card companies may put a lien on your property or garnish your wages.

What to Do Before You Declare Bankruptcy

There are certainly consequences to be aware of before filing for bankruptcy, which may help you get financial relief. Debt settlements can help you negotiate with creditors to reduce your overall debt and extend your repayment period. 

Debt consolidation is another option to consider before you declare bankruptcy as you can take out a new loan to pay off your high credit card balances while getting a lower interest rate. This could make your monthly payments more manageable and help you save money. 

A debt management plan can help you with secured debt and other unsecured debt. You could work with a credit counselor to help you lower your payments for your credit cards.

Before you take any of these steps to set up a repayment plan at a lower interest rate or try to solve problems with non-exempt property and other unsecured debts, you should set up a free consultation with DebtPros. Our attorneys can help you decide the best course of action when choosing bankruptcy for credit cards.