The Law Office of Brad Hawley, LLC
Skilled Bankruptcy, Family Law And Defense Guidance In Prattville, Alabama

Using bankruptcy to deal with credit card debt

Are you racking up thousands of dollars in credit card debt and constantly missing payments? If so, you might be wondering about your best option. Maybe you have already tried negotiating with your creditors to lower your interest rate, but it has not worked. You might be considering bankruptcy but concerned about the impact it will have on your credit score.

Declaring bankruptcy is a significant decision that should not be taken lightly, but it can provide relief from credit card debt. Here is what you need to know about two of the most common options.

Chapter 7

If you file for Chapter 7, your debts get discharged in exchange for giving up some assets. In Chapter 7 bankruptcy, a trustee will be able to examine your assets and identify which ones can be liquidated to satisfy your creditors. If you qualify for this type of bankruptcy, the elimination of your credit card debt can prevent credit card companies from taking further action against you.

Chapter 13

As an individual, your other option is Chapter 13. This form of bankruptcy is generally for people with a regular income who want to reorganize debts and keep assets. A typical Chapter 13 case involves creating an affordable repayment plan over the course of three to five years.

This is a good option if you have other debts on top of your credit cards. You may be able to pay back your credit card debt through a payment plan without accruing any additional interest.

The impact on your credit score

It is true that filing for bankruptcy will have a real impact on your credit score. However, it diminishes over time and you can take steps to rebuild your credit. If you get a credit builder loan or secured credit card and stick to a reasonable budget, you can build a positive payment history more quickly than you might expect.

 

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