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You generally cannot file bankruptcy for credit card debt only unless credit card debt is the only form of debt you have. When filing for bankruptcy, you must list all your debts, not just credit cards.
If credit card debt is your only debt, whether you should file bankruptcy depends on the amount of credit card debt you have, your eligibility to file Chapter 7 or Chapter 13 bankruptcy, and other factors.
If you’re unsure whether bankruptcy is the best solution for relieving your debts, a North Carolina bankruptcy lawyer can help you explore possible alternatives and help you make the best decision for you.
What Should You Do if Your Credit Card Debt is Overwhelming?
Credit cards are one of the most common forms of debt, and with high interest rates, credit card debt can get out of control quickly. If your credit card debt is overwhelming, filing for bankruptcy may be a good choice that allows you to eliminate your debt and get a fresh financial start.
However, the bankruptcy process is difficult and can have long-lasting consequences, so you should carefully consider your options and speak to a bankruptcy attorney before making a final decision.
What are the Advantages and Disadvantages of Filing Bankruptcy?
Filing for bankruptcy has many advantages, including:
- Clean slate: Most notably, filing for bankruptcy allows you to eliminate most of your debts and start fresh from a clean slate. If you meet your end of the agreement, your remaining debts will be discharged at the end of the bankruptcy process, and you will be granted a fresh start.
- Keep your assets: In most cases, the bankruptcy process allows you to keep your necessary assets, such as your home and car. Bankruptcy lawyers can advise you on which assets you can keep, depending on the type of bankruptcy you file.
- Automatic stay: According to 11 U.S. Code § 362, your creditors must stop contacting you as soon as you file for bankruptcy. This can take a huge burden and annoyance off your shoulders.
The primary disadvantage of filing for bankruptcy is damage to your credit. A bankruptcy filing generally remains on your credit record for 7 to 10 years.
Even if you are diligent in rebuilding your credit, the damage to your credit score will likely last for several years. This can make it difficult to get a new credit card, mortgage, or other loan. You may also face opposition in obtaining employment, renting a home, etc.
Additionally, not all debts can be discharged through bankruptcy. For example, if you have student loans, unpaid child support or alimony, or recent tax debts, these may not qualify for discharge.
The decision of whether to file bankruptcy for credit card debt or other debts is one you should take seriously. We strongly advise consulting with a bankruptcy lawyer to learn about all your options.
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What Bankruptcy Options are Available for Credit Card Debt?
If you choose to file for bankruptcy, you must list all your debts, including credit cards, mortgage, car loans, medical bills, etc., in your petition. Most personal bankruptcy filers choose either Chapter 7 or Chapter 13 bankruptcy.
Chapter 7 Bankruptcy
To qualify for Chapter 7 bankruptcy (also called “total bankruptcy”), you must pass a means test to prove you don’t have enough income to pay back your debt. With Chapter 7, no repayment of discharged debt is required and most people can keep all their assets.
Chapter 13 Bankruptcy
If you don’t pass the Chapter 7 bankruptcy means test, you may qualify for Chapter 13 bankruptcy (also called “reorganization bankruptcy”) instead.
For Chapter 13, you must have a steady income to make monthly payments. For some situations, Chapter 13 can have additional advantages and tools than Chapter 7 to resolve your debt and retain your assets.
According to the U.S. Courts, Chapter 13 filers typically have a payment plan that lasts three to five years. If you make all your payments, your remaining debt will be discharged at the end of the plan period.
What Alternatives to Bankruptcy Exist for Eliminating Credit Card Debt?
If you want to avoid bankruptcy, you may be able to reduce or eliminate your credit card debt through other means, such as:
- Credit negotiations: You can try to negotiate with your debtors. In some cases, they may be willing to settle your claim for a smaller lump sum, lengthen the term of your loan, or allow you to make smaller monthly payments.
- Debt consolidation: This strategy combines all your smaller debts into one monthly payment, potentially allowing you to pay off your loans faster.
- Credit counseling: A credit counselor can analyze your unique financial situation, help you develop a budget, create a debt management plan, and help you pay off your debts.
Bankruptcy attorneys can walk you through these and other options to determine the best choice for your unique situation.
How Can a Bankruptcy Lawyer Help You?
A bankruptcy lawyer can help you in many ways, including:
- Evaluating your unique financial situation
- Explaining the advantages and disadvantages of bankruptcy so that you can make an informed decision
- Explain how filing for bankruptcy will affect your finances, assets, etc.
- Exploring possible alternatives to bankruptcy that may help you
- Determining whether you qualify for Chapter 7 or Chapter 13 bankruptcy
- Helping you gather the required information and complete all the necessary paperwork for filing for bankruptcy
- Representing you in hearings and creditor meetings
- Answering all your questions throughout the bankruptcy process
Connect with an Experienced Bankruptcy Attorney Today
Bankruptcy is not a magic wand that eliminates your debts without consequence, but it can be a viable option for those with overwhelming debt that they cannot pay. While you generally cannot file bankruptcy for credit card debt only, it may be a good option to help you pay off all your debts.
To learn more about the bankruptcy process and whether it’s the right choice for you, contact our legal team at Farmer & Morris Law, PLLC today.
We offer free initial consultations and can connect you with a bankruptcy lawyer who will review your unique situation and offer sound legal advice.
