Filing Bankruptcy For Credit Card Debt
Credit cards help people achieve a lot of things. They can buy holiday gifts for multiple people, and give nicer gifts than they might otherwise be able to give if they had to save up to get them. At first, monthly payments might not seem so bad. But emergencies happen, and there is another charge. Payments go up. Interest rises. It can seem like the only way out is credit card bankruptcy.
How to Get Rid of Credit Card Debt Through Bankruptcy?
By the time most people start to consider bankruptcy for their debts, they have already paid the credit card companies a large amount in interest.
If they struggle to make minimum payments with that interest, they continue to pay mostly interest and very little of their actual debt.
Bankruptcy allows them to reorganize the way they think about and handle their finances and gives them an opportunity to make better choices in the future. At Nathan A Berneman, APC, our Los Angeles Bankruptcy attorney can help you figure out the best way to get relief from bankruptcy debt and stop nagging communication from your debtors so you can start moving forward with your life.
Depending on your income, the property you own, and your desire to keep an active credit card into and after your bankruptcy, you will likely be a candidate for either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy has income and asset limits attached and is commonly thought of as “debt forgiveness.” Chapter 13th is a reorganization of your debt.
Chapter 13 Bankruptcy and Credit Card Debt?
There are many people who like the idea of Chapter 13 to help them get a handle on their credit card debt, without giving up as much control as they might need to in a Chapter 7 bankruptcy.
If your income is more than the median income, or if you own too much property, it will be the only option you have. In many cases, it is a vast improvement than continuing to struggle and making payments that go mostly toward interest.
With Chapter 13, your credit card debt, and other debt is reported to a bankruptcy trustee and your financial resources are considered.
A repayment plan is made, lasting 3-5 years where reasonable payments are made toward paying off your debts, and at the end of that time, your bankruptcy is discharged.
Chapter 7 Bankruptcy and Credit Card Debt
If you make less than the median income guidelines, Chapter 7 may be an option for getting rid of your credit card debt and other unsecured debts, Some debts, like taxes and student loans, are not included. Rather than having you pay a portion of the debt over time, the debt is canceled, and with a few exceptions, you are given a fresh start/
Can I Keep my credit card after bankruptcy?
Credit cards can be helpful, especially for things like renting a car or hotel room, even if you don’t carry a balance on them. Losing all your cards can be hard for some people.
There are ways to get around losing all your credit cards, or limiting the amount of time you are on a “cash only” system.
If you file a Chapter 13 bankruptcy, all your balances need to be reported, so technically if you have a card without a balance, it does not have to be included in the filing and it can be used as an “emergency” card during the bankruptcy process.
If there is a card that still has a balance, but not too much another option might be to reaffirm the debt with the bank that holds it. Rather than lose a customer, or have the balance discharged some banks will renegotiate an agreement with a cardholder.
If that is done, it won’t be eligible to include in the bankruptcy, so it is important to consider if it is necessary to keep the card.
Most of the time credit card companies do cancel credit cards of people who have filed a Chapter 7 and cut their losses. While the credit card bankruptcy does stay on your credit record for many years, a lot of filers start getting offers much sooner that will give them an opportunity to show that they can be responsible with their credit, and inch their score upwards.
Sometimes these cards have a very low balance to require a deposit to secure the card at first. They may also carry a high-interest rate, however, if they are used minimally and paid off frequently, they can still be helpful financial tools.
Tips on making sure that your credit card use has a positive impact.
When you get out of control with your credit card debt, it is hard to get that control back on your own. It is best to keep good habits in the first place, or in the second place if you are rebuilding after a bankruptcy.
Use Your Card Like a Short Term Loan
If you have one or two cards, it is good to think of them a bit like a short term loan for purchases. If you buy something with credit and pay the bill before it is due, you do not have to pay interest.
You can catch sales or specials that may expire before payday. You can also take care of that car repair that came up before payday, and you can make a plan to pay it as soon as possible, even if it can’t be done with one check.
Let Your Card Be Home for Smaller Bills
Using your card a little, and paying it off is better than leaving it dormant. Small fixed bills, like streaming services, internet access, and other memberships can be packed onto a single account. This gives your card use and you can pay one bill instead of several. It also helps your record-keeping, and you’ll know where to look if you ever decide to scale back.
If your credit card debt has gotten out of control, it may be time to talk to a bankruptcy attorney. At Nathan A Bernean, APC, we will look at your individual case and help you decide the best choices to make for your financial future. To learn more, contact us at 805-492-7045 to schedule your complimentary consultation.