Credit Card Debt: Filing Bankruptcy

Credit card debt can get unwieldy quickly because of the high interest rates they carry. Life can be stressful when you don't have enough money to pay your bills. Bankruptcy is designed to help people reclaim their lives and relieve the stress of excessive debts.

Challenges By Creditors

Your creditors have a right to challenge your discharge petition. Thus, you must be careful not to do anything that would give the court an excuse to deny your petition as to any debts. The following are potential reasons why a creditor would challenge a petition:

• Cash advances;
• Pattern of use of one credit card to pay other credit cards;
• Recent activity on the card for things such as travel or other luxuries;
• Non-necessary purchases; and
• Exceeding the credit limit.

Chapter 13

Chapter 13 bankruptcy helps individuals restructure their debt. Once the petition has been granted, the individual will have a monthly payment that will last for a number of years. This monthly payment will be based on their income and the amount of debt and other assets they have. Chapter 13 is intended for individuals who have assets they do not wish to include in a bankruptcy (assets they want to keep) and who make a fairly good income. They must be in financial trouble though and having difficulty paying all their debts timely in order to be eligible for chapter 13.

Chapter 7

Chapter 7 bankruptcy allows you to erase all debts included in the petition (if the petition is granted). It is designed for individuals who have no or little assets and a limited income. Credit card debt can be included in your chapter 7 bankruptcy.

Positive Impacts of Bankruptcy

Getting rid of some of your debt or all of your debt can be a huge relief if you have been under the strain of financial obligations that exceed your income. Bankruptcy can help you start new financially.

Negative Impacts of Bankruptcy

Bankruptcy stays on your credit for 7 to 10 years. It may make it difficult to rent a home or purchase a vehicle. It will take time and effort to rebuild your credit, but if you are careful, eventually you can improve your credit score.

Getting Legal Help

If you are contemplating bankruptcy due to credit card bills you cannot afford, discuss your situation with a bankruptcy attorney. An attorney will make bankruptcy more approachable by representing you in court, filling out and filing your paperwork, and advising you of your options. You will have more confidence in the process with an attorney at your side.