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You can file for bankruptcy on credit cards. Bankruptcy allows individuals and small businesses to eliminate credit card debt or restructure/consolidate debt to pay off creditors. In addition, filing for bankruptcy will stop collection activities for the duration of your case.
Continue reading to learn more about filing for bankruptcy and how you can regain control of your financial future.
When Should You File for Bankruptcy on Credit Cards?
If you are an individual or small business owner with credit card debts you cannot pay, bankruptcy can help you get rid of your debt or create a plan to pay off what you owe in a more manageable way. You may benefit from filing for bankruptcy if:
- Your creditors refuse to negotiate a repayment plan
- You are financially incapable of paying your debts (i.e., your credit card payments exceed your monthly income)
According to the Consumer Financial Protection Bureau, once you file for bankruptcy, your creditors must stop collection activities while your case is pending. If your bankruptcy is successful, your credit debt will be eliminated or reorganized in a way that allows you to pay.
Who Can File for Bankruptcy?
Most individuals, businesses, and municipalities can file for bankruptcy if it is financially necessary. Some states require that the filer be at least 18 years old, and there may be a residency requirement that mandates how long you must live in a state before you can file there. You must also take a credit counseling course and receive a completion certificate.
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What Type of Bankruptcy Is Right for You?
The type of bankruptcy you file for will depend on whether your goal is to eliminate your credit card debt or create a plan to repay your debt. According to the United States Courts, you have the following options:
- Chapter 7 bankruptcy allows individuals to discharge their debts and maintain most of their assets. Businesses can also liquidate under Chapter 7.
- Chapter 9 bankruptcy allows municipalities, like towns, cities, and taxing districts, to reorganize their debt.
- Chapter 11 bankruptcy gives businesses the opportunity to reorganize and restructure debt while continuing to operate.
- Chapter 12 bankruptcy helps family farmers and fishermen to reorganize, restructure, or develop a payment plan for debt.
- Chapter 13 bankruptcy allows individuals to develop a manageable, multi-year repayment plan for credit card and other debts.
- Chapter 15 bankruptcy assists international debtors.
What Debts Does Bankruptcy Discharge?
With a Chapter 7 bankruptcy, you can discharge most credit card debts and many other unsecured debts including medical bills, overdue utility bills, and personal loans. Filing for bankruptcy can also help you protect some of your assets and stop repossessions, foreclosures, and evictions.
Are There Some Types of Credit Card Debt You Cannot Eliminate?
There are some credit charges you may not be able to eliminate through bankruptcy. These include the following:
- Secured purchases. Sometimes, credit card companies may secure the debt on large-ticket items, such as expensive jewelry, furniture, appliances, or electronics. If you have secured purchases, you can ask the court to let you “redeem” the property by paying off its actual cash value instead of the amount still owed. You can also forfeit the property to pay off your debts.
- Luxury goods and services. While reasonable purchases of food, gasoline, or clothing are fine, you may be on the hook for luxury goods or services of $800 or more if you charge them within 90 days of filing for bankruptcy.
- Cash advances. You may be responsible for paying back cash advances on your credit card taken shortly before or after you file for bankruptcy.
Are There Penalties for Filing for Bankruptcy?
Filing for bankruptcy on credit cards can hurt your credit score in the short term but so can failing to pay your bills. Because bankruptcy helps you get on top of your debts by wiping them clean, it can give you a fresh start.
After completing your bankruptcy, you can get another credit card. In the long run, you may be able to improve your credit by making timely payments on your new account.
What Do You Need to File for Bankruptcy?
Once you decide to file for bankruptcy on credit cards, you will need to gather a plethora of information about you and your finances. The documents you will need will vary depending on the type of bankruptcy you file. Information you may need includes but is not limited to:
- Several years of tax returns (two years for Chapter 7, four years for Chapter 13)
- Tax transcripts
- Six months’ worth of proof of income, bank statements, and investment and retirement statements
- Copies of your driver’s license and Social Security card
- Credit card statements
- Credit reports
- Mortgage statements
- Car loan statements
- A credit counseling completion certificate
Do You Need a Bankruptcy Lawyer?
You are not legally obligated to hire an attorney to handle your bankruptcy. You can attempt to discharge or restructure your debts through the courts on your own, but it can be an overwhelming and daunting process for those without experience. A lawyer with our firm can help you navigate your bankruptcy. We can:
- Help you understand your financial situation and determine which type of bankruptcy is right for you
- Recommend required debt counseling and help you meet other filing requirements
- File your case and adhere to the deadlines
- Help you complete and submit paperwork and forms
- Ensure you submit the appropriate personal and financial documents to the court
- Answer your questions, respond to your concerns, and help you understand bankruptcy law
- Determine and calculate your maximum dischargeable credit card debts
- Help you retain your property, protect your assets, and avoid foreclosures/evictions
- Represent you in bankruptcy court
Contact Farmer & Morris Law, PLLC, for Bankruptcy Assistance
A bankruptcy lawyer with Farmer & Morris Law, PLLC, can help you manage your bankruptcy case. We will fight to discharge credit card debt and other debts so you can get your financial future on track.
Contact us today for a free case review. We assist with Chapter 7, 11, 12, and 13 bankruptcies. We proudly serve clients at four offices throughout North and South Carolina.
