Bankruptcy is a legal option to help you find relief from your debt. Has credit card debt taken over your life? Credit card debt is among the dischargeable debts under bankruptcy. If you have credit card debt you would like to eliminate by filing bankruptcy, there are certain things you need to know. For example, how bankruptcy discharges work and alternative options to get rid of debt. Read on for the four things you should know about bankruptcy and credit cards.
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Can I File Bankruptcy On Credit Cards?
Yes, you can. However, it is not always a straightforward process. Filing bankruptcy on credit cards can get complicated. First, you need to see if you qualify for bankruptcy and decide which chapter between 7 and 13 you need to file.
Are You Eligible To File For Bankruptcy, And What Are My Alternatives?
There are qualifications you need to meet to file for bankruptcy. So, even if bankruptcy discharge can forgive your unsecured credit card debts, it is only possible if you qualify to file. Fortunately, if you don’t qualify for Chapter 7, you can always file for Chapter 13. Take a Chapter 13 calculator to see what your payments may be.
What You Need To Know About Filing Bankruptcy On Credit Cards
You can get a debt discharge for unsecured debts when you file for bankruptcy. Most credit card debt is considered unsecured debt, since credit card companies don’t ask for collateral. So, if you default on your payments, and the creditor decides to take collective action to recover the debt, they will first need to file a debt collection lawsuit to get a monetary judgment.
Then, they will need to file a petition with the court to get a levy or wage garnishment order. However, not all states permit wage garnishment, so it depends on the laws in your state. Besides, most states exempt some assets from being used by creditors to repay judgments.
Filing for either chapter of bankruptcy can help get rid of credit cards in most cases. But if you are filing bankruptcy only to manage your credit card, you should consider other alternatives. If you live in a state that does not permit wage garnishment, and the only debt you owe is credit card debt, you might need to consider other alternatives.
Consult a bankruptcy attorney before filing bankruptcy. Sometimes, if the debt is small, the creditor may be unable to enforce a judgment, and filing bankruptcy may not be the ideal option for you. A bankruptcy lawyer can offer professional advice on a better credit card debt relief option for you.
But if you have other debts, the state permits wage garnishment alongside high credit card debt; filing bankruptcy may be the best move to protect your property. So, consult an attorney before filing for bankruptcy to discuss your options.
Cost Of Bankruptcy
If you qualify, the next consideration is cost. You can use a bankruptcy calculator to estimate your finances and qualification. Additionally, you should also consider the cost of filing bankruptcy in your state.
The cost of filing bankruptcy depends on where you live. Here is a guide on how much it costs to file bankruptcy in Nevada or how much it costs to file bankruptcy in New Jersey. Look up the specific cost of filing in your state rather than looking at general filing costs to get an accurate prediction.
Will My Credit Card Debt Get Discharged if I File for Bankruptcy?
Although credit card debt is dischargeable in most cases, every case is unique, and there are cases where your debt may not be discharged. For example, if you make your child support, alimony, or tax debt payments using your credit card, it cannot be discharged. These are non-dischargeable debts, and thus, the amount spent on these debts cannot be discharged.
Additionally, recent charges to your credit card are ineligible for discharge. If there is a recent charge to your credit card for purchasing luxury items or services worth $725 on one credit card within 90 days before filing bankruptcy, the debt cannot be discharged.
The purchase will be presumed fraudulent since you entered a contract to repay the amount knowing you couldn’t repay. Besides, luxury items are not necessary for you or your dependents’ basic needs and thus, are deemed unnecessary.
So, if your credit card company decided to file an adversary lawsuit, the court could choose not to discharge your debt. You need to prove you did not commit fraud in anticipation of filing a lawsuit.
The same applies when you get a cash advance of $1,000 or more within 70 days before filing bankruptcy. Your credit card company could decide to file an adversary proceeding and deem your credit card debt non-dischargeable.
As you consider your debt relief options and settle for bankruptcy, avoid using your credit cards to be eligible for bankruptcy relief. Also, if you have spent a substantial amount on your credit card in the past 90 days, consult a bankruptcy attorney for guidance on the best time to file for bankruptcy.
Alternative Options To Help You Pay Debt Consolidation And Debt Settlement
Besides filing for bankruptcy, you have other debt-relief options like debt consolidation and settlement to get rid of credit card debt. However, each option has its advantages and disadvantages. While debt consolidation is a great option, the main disadvantage is that most people use their home equity while consolidating their credit card debts. Thus, you will be turning in your unsecured credit card debt to secured debt. So, if you later fall back on your payments, you might lose your home.
How Do Relief Fees Work?
Debt settlement is also a popular alternative for people seeking debt relief, but it has its set of challenges too. In debt settlement, you need a lot of money to make a lump-sum payment to your creditors. Therefore, most people apply for a debt consolidation loan and praise their retirement savings for paying their credit card loans.
Similar to using the equity in your home, retirement savings are protected too in bankruptcy, so you will be using funds you might need later unnecessarily. Freedom Debt Relief and National Debt Relief are two of the biggest players in the United States. Freedom charges an average of 21.5% of the enrolled debt, and National Debt Relief fees range from 15 to 25%.
Additionally, when you pay off your debt, the amount credit card companies write off is classified as income by the texting authority-Internal Revenue Service. So, you are obliged to add these amounts to your tax returns, which could attract a tax debt in the year. So, before considering debt consolidation, settlement, or filing bankruptcy, it is wise to consult a bankruptcy attorney.
Should You Do Freedom Debt Relief?
If you are filing bankruptcy to get rid of your credit card, depending on your situation, you could benefit more from other debt-relief alternatives. Go through these Freedom Debt Relief Pros and Cons to evaluate your available debt relief options.
You can also research more about debt settlement and see if it may be the right choice. However, you need to be careful with the company you choose to work with. According to this Freedom Debt Relief Lawsuit, debt settlement companies are engaging in malpractice. So, if you identify a company you would like to hire, look into the company before working with them.
Use A Bankruptcy Calculator To Compare Your Debt-Relief Options
Numerous debt-relief options are available to you when dealing with loans-credit card debt, student loans, or medical bills. You can also consider using this credit secret 11-word phrase to help stop debt collectors.
Each debt-relief option is unique, attractive at different costs, and has distinct pros and cons. Therefore, you should consider all options and compare before settling for a debt-relief option. An easy option to help you compare is using a bankruptcy calculator. The calculator will;
- Provide an estimate of all costs of filing bankruptcy under both chapters and costs for debt settlement, debt pay off planning, and debt management
- Break down the costs.
- Show the pros and cons of each option
- Recommend options near you for each option
As bankruptcy experts, we can provide reliable information on debt relief if you are struggling to stay afloat if your payments. Call us today to get reliable, professional advice on the best debt-relief option for you. The sooner you take action, the sooner you can get back on track with your finances.
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