Can Bankruptcy Help with Large Credit Card Debt?
According to credit reporting agency Experian, Americans maintained approximately $830 billion in credit card debt through 2019. Almost 20% of credit cardholders carried more than $10,000 and almost 4% owed more than $30,000 in credit card debt.
Owing large credit card debt causes significant financial stress. Many people with large credit card debt only obtained such an enormous debt because they were trying to pay for important things such as medical care or necessities after a job loss.
If you need relief from large credit card debt, bankruptcy could help you.
Credit Card Debt and Bankruptcy
With some exceptions, both Chapter 7 and Chapter 13 bankruptcy can assist with credit card debt. Each bankruptcy chapter handles credit card debt differently.
In Chapter 7 bankruptcy, if you meet income eligibility, your unsecured debt (i.e. credit card debt and medical bills) could be eliminated. This is true, no matter how much unsecured debt you owe.
In Chapter 13 bankruptcy, you repay your creditors through a court-approved repayment plan that lasts three to five years. How much you are required to pay will depends upon the amount of disposable income you have remaining after expenses. In chapter 13, you can only file bankruptcy on up to $419,275 of unsecured debt.
Most who file Chapter 13 bankruptcy pay only a small percentage of their credit card debt. After completing the repayment plan, the remaining credit card balance is discharged. This means that credit card companies cannot collect any remaining balance of the debt.
Getting Help with Credit Card Debt Bankruptcy
Knowing if you should, when you should, and how you should file bankruptcy depends on a variety of factors. Your income, amount of debt, and value of assets play an important role in determining how certain bankruptcy rules apply to you. Not understanding how these things work together could cause problems.
Before deciding about bankruptcy on your own, contact an experienced bankruptcy attorney. Brock & Stout’s bankruptcy attorneys have over 25 years of experience helping clients understand the best way to deal with credit card debt. Whether you’re in Birmingham, or anywhere in Alabama, contact us for a free evaluation of your financial situation to find out the best options for you. We want to help ease your financial burdens so you can have a fresh start.