Are you overwhelmed with credit card debt? Most people that find themselves overburdened with credit card debt started using credit cards to supplement their income to help make ends meet.  In the beginning it can be easy to maintain a small payment on a single card; but, for a variety of different reasons, that one card can payment can turn into a couple of credit card payments, then that couple of payments can turn into a few payments. Then, the monthly minimum payments aren’t covering the accumulating interest and this credit card usage has ballooned into a real financial burden and you have no way to make the payments required to actually reduce the balance.

This may seem like an exaggerated situation but many Alabamians find themselves in this very situation.  Almost a third of American’s live paycheck to paycheck.  Recent inflation has further exacerbated this situation.  However, there are routes to break this vicious cycle.  If you need a fresh start bankruptcy could be the answer to your problems and put you on the road to financial recovery. Read on to see 3 ways that bankruptcy could help get you back on track and relieve you of the overwhelming burden of credit card debt.

Bankruptcy Could Stop Harassment from Credit Card Debt Collectors

Have you been delinquent in paying a credit card balance for over 180 days? Has the credit card company turned your account over to a debt collector? Have you been receiving many letters and calls about you paying the debt? Is the credit card debt collector threatening to have your wages garnished?

Filing bankruptcy could stop this harassment by credit card debt collectors. One of the primary protections provided when you file bankruptcy is known as the “automatic stay.”  The automatic stay requires most creditors to stop collection activity against a debtor during the pendency of a bankruptcy. The automatic stay goes into effect the moment you file your bankruptcy petition. Once the automatic stay is in effect, any of your credit card lenders or debt collectors must completely stop all communication and collection attempts while you are in bankruptcy.

Bankruptcy Could Completely Eliminate Liability for Credit Card Debt

Pursuant to the United States Bankruptcy Code credit card debt is an unsecured debt that is eligible for discharge through bankruptcy. There are different ways to obtain this discharge depending on the chapter of bankruptcy you file under. Under Chapter 7 bankruptcy, your credit card debt could be eliminated without you having to repay anything. Under a Chapter 13 bankruptcy, your debt is restructured in a Chapter 13 repayment plan.  In Chapter 13 the amount you pay is based off a function of your income, assets, and outstanding liabilities.  In Chapter 13, depending on your situation, you may be responsible for only a fraction of what your owed.

Upon exiting Chapter 7 you will obtain a discharge of the credit card liability.  Upon completing the Chapter 13 plan you will obtain a discharge of any remaining credit card liability.  Under either chapter you will no longer be legally responsible for any amount owed.

Bankruptcy Could Repair Damage Credit Card Caused to Credit Score

Having credit card debt in collections status on your credit report is extremely detrimental to your credit score. It is estimated that having only one account in collections reduces a credit score by 50–100 points. The longer the delinquency stays on your credit report, the worse it is for your credit score.

Although a bankruptcy goes on your credit report and may stay there 7 to 10 years after completion, for many people, filing bankruptcy actually results in improvement to their credit score.  It seems the credit bureaus algorithm that produces credit scores may value debt being listed in “bankruptcy” status more highly than it does accounts listed as delinquent and in collection for extended periods of time.

Could Bankruptcy Help You With Your Credit Card Debt?

Everyone’s financial situation is different. It is best to seek the help of an experienced bankruptcy attorney to see if bankruptcy is right for you. But, don’t delay in seeking help because you could miss out on your financial fresh start.

Brock and Stout’s bankruptcy attorneys have over 25 years of experience helping clients get out from under the heavy burden of credit card debt. Contact us for a free evaluation of your financial situation to see if we can help you.