Logomakr_6hi_Xi_W

Call a debt relief specialist toll free (877) 297-4477

Credit Card Bankruptcy Basics:How to File for Chapter 7 & 13

Although many people don’t realize this, filing for bankruptcy could leave you with many negative impacts on top of the positive ones. Sometimes, you may not even have any positive impacts at all, depending on your situation. If you’re considering filing for credit card bankruptcy, you should make sure to educate yourself on the subject first. Keep reading to learn more about credit card bankruptcy.

Credit Card Bankruptcy

Advantages and Disadvantages of Filing for Credit Card Bankruptcy

On the one hand, filing for credit card bankruptcy could potentially have all of your debts forgiven in the case that you qualify for Chapter 7. Qualifying for Chapter 7 means that you are seen as being without the ability or financial means to pay off your debt, leading to your present debts being forgiven if you qualify.

On the other hand, however, there are also many negative impacts of filing for credit card bankruptcy. Declaring bankruptcy will stay on your credit score and history for the next seven to ten years, reflecting poorly on your reputation for at least the remainder of that time. When your credit is that poorly affected, it can make life very difficult. You may have trouble finding better housing, employment, or financial assistance while your credit is affected. If you are approved for financial assistance, it will likely be accompanied by a high interest rate which could put you back in overwhelming debt again.

The Bankruptcy Abuse Prevention and Consumer Protection Act

The Bankruptcy Abuse Prevention and Consumer Protection Act was passed in 2005, introducing stricter rules for those who were filing for credit card bankruptcy. Under this act, anyone filing for bankruptcy would be put under great judgment so that there would be no doubt that they were using bankruptcy as a way out of their financial obligations. This was put into place after speculation that many people were abusing bankruptcy as a way to get away with their poor spending habits.

Believe it or not, the goal of this act truly was to help people manage their debt and pay back their loans. Different incentives were included that might help make payments more realistic and manageable—such as lower interests. In fact, those with lesser income would also have the opportunity to have their credit card debts and medical bills completely forgiven. People with higher income are required to file credit card bankruptcy under Chapter 13. Under Chapter 13, they may be assigned a plan that would allow them to pay off some or all of their original debt. These plans were often lengthened so that monthly payments could be lowered.

The act also introduced a limit to how many times a person may file for credit card bankruptcy: once every two years. On top of that, if the filer purchases a car loan within 30 months after bankruptcy, the car must be paid for in full.

Creditors were also affected by this act, as it required them to raise their monthly payment rates so that debtors could pay off their card quicker. This would also result in lower interest rates, which would decrease the amount of money creditors profited from the debt.

How to File for Credit Card Bankruptcy

Before you can actually file for personal bankruptcy, you must first show that you have paid for at least six months of credit counseling. This acts as proof that you have already tried to mend your financial situation with a method other than bankruptcy. The counselor would then advise you regarding whether or not you should file or simply make a plan to pay off your debt.

Even if you are immediately advised to file, you will still be required to enroll in classes that teach you how to prevent the situation from happening again in the future. On top of that, filing for bankruptcy has become more expensive than ever before. The higher cost is meant to discourage people from abusing the system.

If you are considering filing for bankruptcy, Strategic Debt Relief can offer qualified advice regarding your situation. We highly advise that you speak with an expert before making a decision. Call us at 877-297-4477 for a free consultation today.