Many people currently rely on their lines of credit or loans to make ends meet. You pay your credit cards but cannot afford your everyday essentials. Such as groceries for their families and paying utility bills. Others are creating more debt strictly to maintain their standard of living that they cannot afford. High-interest credit cards remain one of the largest issues individuals face in their fight for financial health. It is no surprise that credit card debt remains one of the primary reasons people are forced to file for bankruptcy.
Realizing that you cannot pay off your credit card debt can be gut-wrenching. Making minimum payments only covers the monthly interest charges, and the principal balance barely gets touched. You have no disposable income or way of getting ahead with your payments. What do you do?
Filing for bankruptcy can be a way to regain control of your finances and create a fresh start for yourself and your family.
Simple. Stop using your credit cards as soon as you cannot pay for your purchases and as soon as you decide to file for bankruptcy. There is an exception that exists. You may use your credit card for necessities such as food, heating, or much-needed car repairs. If you are going to rely on this exception, keep records of your expenses, so you are prepared if questioned by a creditor.
If you are not going to rely on the exception for necessities, it is recommended that you stop using your credit cards for at least 90 days before filing for bankruptcy. If you choose not to stop using your credit cards, your creditors may challenge your discharge, and you could be accused of fraud. This means that you ran up bills with no intent to repay them either because you knew you would file for bankruptcy, or you lacked the financial ability to make good on the charges.
For example, you decide to charge $800 to a single creditor for luxury goods or services within 90 days of filing for bankruptcy. (Luxury items are expensive shoes, video games, vacations, or items not needed for everyday life.)
By and large, most credit card debt is dischargeable by filing for bankruptcy. If you are working with a bankruptcy attorney, ask them how you should manage your current situation between your consultation and the date of your official filing. Depending on the chapter of bankruptcy – Chapter 7 or Chapter 13 – the time period for the discharge and the payment options available may differ.
Filing chapter 7 bankruptcy ensures that almost all credit card debt is erased or discharged. If you think you are absolutely unable to pay off your debt in a timely manner or you owe more than you can reasonably afford to repay, this may be your best option.
The majority of those that file Chapter 7 have their debts eliminated within approximately 90 days. To file Chapter 7, you must meet certain income requirements as well. Your bankruptcy attorney will be able to walk you through the steps and determine if you qualify for Chapter 7.
Receiving a discharge under Chapter 7 will not remove these accounts from your credit report. They will be noted as “discharged through bankruptcy.” The bankruptcy itself will be noted in the public records section of your credit report for ten years, but the credit card accounts can be removed after seven years. Discuss with your bankruptcy attorney how you can begin to repair your credit during this time period. Don’t wait till ‘bankruptcy’ is removed from your credit report – start to repair your credit the day you file your bankruptcy.
Chapter 13 bankruptcy is more along the lines of a repayment plan. Filing for this type of bankruptcy may require you to pay back a portion of your debts on a repayment plan. This can take between three and five years. Chapter 13 bankruptcy is the best option if you cannot afford to pay back your debt in full but do not qualify for Chapter 7.
You may also choose Chapter 13, which may allow you to pay back your tax obligation, restructure your vehicle loan, and keep your car, home, and other assets while discharging some or all of your debt.
While you are working through the repayment process, the accounts included in your bankruptcy will be noted as “included in bankruptcy.” After completing your repayment plan (three to five years), you will receive a discharge, and the status will be updated to “discharged through bankruptcy” for the remainder of the seven years. Chapter 13 is typically removed from your credit report seven years after the filing date. Discuss with your bankruptcy attorney how you can begin to repair your credit during this time period. Don’t wait till ‘bankruptcy’ is removed from your credit report – start to repair your credit the day you file your bankruptcy.
If you are facing credit card bills that have spiraled out of control, contact Miller, Hollander, & Jeda today. Let us discuss your options to put you on the path to a fresh start. Filing for bankruptcy is not the end of the road. You do not have to continue to drown in overwhelming debt. We want to help you stabilize your financial future!
Miller, Hollander & Jeda’s founding attorneys began practicing in the early 1970s before putting down roots in the area and joining forces in 1992 to create the Naples, Florida, law firm that bears their names. Since its inception, Miller, Hollander & Jeda has focused on bankruptcy. The goal of our attorneys and our experienced staff, established at the outset and built upon year by year, is to use our extensive knowledge of bankruptcy law to answer the complicated questions you have regarding your financial trouble and help you solve your problems. We take pride in helping clients get a fresh start.