Monday, August 8, 2022

How To File Bankruptcy Credit Card Debt

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Why Isnt A Credit Card Always A Creditor

I’m $80,000 in Credit Card Debt! File for Bankruptcy?

A credit card isnt always a creditor because the bankruptcy code defines creditor as someone who has a claim for money against the debtor.

  • If there is a balance on the card, then the credit card company has a claim for that balance, and is a creditor
  • If there is no balance on the card, then the card company doesnt have a claim, and they are therefore not a creditor

So a card without a balance does not need to be listed in your bankruptcy, and the credit card company might decide to let you keep it open.

Does Filing For Bankruptcy Clear Credit Card Debt

Bankruptcy is one of the most powerful tools available for dealing with credit card debt. Its important to review your limitations with your bankruptcy attorney before you file to avoid unwanted scrutiny from the court.

If youd like to know more about bankruptcy or you have a lot of credit card debt and youre curious if bankruptcy could help you, we can help. Contact the Law Office of Robert M. Geller at to schedule a consultation.

How Long Does A Chapter 13 Bankruptcy Stay On Your Credit Report

A Chapter 13 bankruptcy stays on your credit reports for up to seven years. Unlike Chapter 7 Bankruptcy, filing for Chapter 13 bankruptcy involves creating a three- to five-year repayment plan for some or all of your debts. After you complete the repayment plan, debts included in the plan are discharged.

If some of your discharged debts were delinquent before filing for this type of bankruptcy, it would fall off your credit report seven years from the date of delinquency. All other discharged debts will fall off of your report at the same time your Chapter 13 bankruptcy falls off.

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Signs That Your Credit Cards Are Pointing You Towards Bankruptcy:

  • Your credit cards are maxed out. If your credit cards are charged to their limit, then it is a clear sign that you may be heading towards bankruptcy. Maxed out credit cards are clear indicators that you have been relying heavily on debt and that you are unable or unwilling to pay off the balance in a timely manner.
  • You miss payments or pay late. Late and missed credit card payments are another sign that you may be heading towards bankruptcy. The inability to pay your credit card bills and pay them on time is a sign that you are financially stressed and may need bankruptcy relief.
  • You refuse to open your credit card bills. If you avoid reviewing your credit card bills on a monthly basis then it is a definite sign that something is amiss and that you could soon be looking at a bankruptcy filing.
  • You use cash advances from one credit card to pay another. Robbing Peter to pay Paul is another very clear sign that you are probably on the road to bankruptcy. Remember, credit cards are not cash they are debt instruments which must be repaid with interest. Using one credit card to pay another is a fools game that only ends with more impossible to repay debt.
  • You consider applying for new credit cards so that you can better juggle the debt you have on your existing credit cards. When you get the feeling that you need more debt just to manage the debt you already have, it is a sure sign that you may need to file bankruptcy soon.
  • How Do You File Chapter 7 Bankruptcy

    Credit Card Debt Relief

    You can probably complete the process within six months. You’ll have to follow several steps.

  • You must complete pre-file bankruptcy counseling from a qualified nonprofit credit counseling agency within 180 days before filing.

  • Find an attorney:Before diving into the various forms required to file Chapter 7, find a qualified bankruptcy attorney to help. Its hard to find money for a lawyer when you need debt relief, but this is not a DIY situation. Missing or improperly completed paperwork can lead to your case being thrown out or not having some debts dismissed.

  • File paperwork: Your attorney will help with filing your petition and other paperwork. But its on you to gather all relevant documentation of your assets, income and debts. An automatic stay goes into effect at this point, meaning that most creditors cannot sue you, garnish your wages or contact you for payment.

  • Trustee takes over: Once your petition is filed, a court-appointed bankruptcy trustee will begin managing the process.

  • Meeting of creditors: The trustee will arrange a meeting between you, your lawyer and your creditors. Youll have to answer questions from the trustee and creditors about your bankruptcy forms and finances.

  • Your eligibility is determined: After reviewing your paperwork, the trustee will confirm whether youre eligible for Chapter 7.

  • Education course: Before your case is discharged, youll have to take a financial education course from a qualified nonprofit credit counseling agency.

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    Long Term Credit Card Debt Solutions

    A Licensed Insolvency Trustee can provide many long term credit card debt solutions.

    A LIT is the only debt relief expert that provides a full range of debt relief solutions.

    In addition to providing bankruptcy and proposal services, a Trustee can also provide credit counselling, budgeting help and assistance with negotiating with creditors.

    Chapter 13 Bankruptcy For Credit Card Debt

    Chapter 13 bankruptcy is called reorganization and unsecured debt, like credit cards, is given a very low priority in the reorganization.

    When you file for Chapter 13 bankruptcy, you submit a plan to the bankruptcy trustee that says you will pay most, if not all, of what you owe in three to five years. The next step is to prioritize the debts, starting at the top with secured debts , and priority debts .

    Unsecured debt, like credit cards is at the bottom of the priority list.

    The Chapter 13 filer then looks at his current and future income and determines how much will go to repay debts in a 3-5 year period. Very little, if any, is set aside for credit card debt.

    If the bankruptcy trustee agrees with the plan, and the consumer makes the required payments, all debts are discharged, including credit card debt, when the final payment is made.

    Because Chapter 13 bankruptcy does not put much emphasis on repaying unsecured debt, its likely most, or all of what you owe on credit cards will disappear with a successful discharge.

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    You May Make Surplus Income Payments

    When you file for bankruptcy, you must do the following:

    • disclose to the LIT information about all of your assets and liabilities
    • advise the LIT of any property that was sold or transferred in the past few years
    • surrender all your credit cards to the LIT
    • attend the first meeting of creditors
    • attend two counselling sessions
    • advise the LIT in writing of any address changes
    • if required, attend an examination at the Office of the Superintendent of Bankruptcy and
    • assist the LIT as needed in administering your estate.

    You may be required to make additional payments to your LIT for distribution to your creditors.

    In addition to paying the LIT’s fees, you may be required to make additional payments to your LIT for distribution to your creditors. These are called surplus income payments.

    Each month during the bankruptcy process, you must submit a copy of your pay stubs and proof of other income to the LIT. The LIT then calculates your surplus income.

    Surplus income is the part of your earnings that exceeds the amount of income a family needs to maintain a reasonable standard of living. This amount is set by the OSB annually. The larger your family, the more you are allowed to keep the more you earn, the more you are required to contribute.

    In other words, if your household income exceeds the level set by the OSB, then you must make additional payments to your LIT during your bankruptcy.

    Is Chapter 7 Bankruptcy Right For You

    I’m $70,000 In Credit Card Debt, File Bankruptcy?

    Make sure you know the difference between Chapter 7 bankruptcy vs Chapter 13 bankruptcy. Chapter 7 makes sense when:

    • You dont have many assets.

    • Your problem debts total more than 50% of your annual income.

    • Your problem debts can be discharged, or forgiven, by Chapter 7. These include debts such as medical bills, credit card debt and personal or payday loans.

    • It would take five years or more to pay off your debt, even if you took extreme measures.

    Some debts typically cant be erased in bankruptcy, including recent taxes, child support and student loans. Bankruptcy still may be an option for you, though, if erasing other kinds of debt would free up enough money to pay the debts that cant be erased.

    The other common form of consumer bankruptcy, Chapter 13, may be better if you have more assets or secured debts, and can repay some or all of what you owe.

    Other debt relief options are available, too, such as a debt management plan through a agency. Take advantage of the free initial advice that credit counselors and many bankruptcy attorneys offer before deciding on a path.

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    What Happens To Company Credit Cards

    If your employer issued you a credit card to pay for travel and other expenses, you might be concerned about including it in your bankruptcy. Youll only have to list the card if youre liable to the lender for the balance.

    Company credit cards come in three varieties based on whos liable on the account:

    • The monthly statement goes directly to the employer, and the employer is responsible for paying the bill.
    • The monthly statement goes to the employee, who is liable for payment of the account, then seeks reimbursement from the employer.
    • A combination of the two. The statement usually goes directly to the employer, but employees reimburse the company for any personal expenses.

    When you file for bankruptcy, you must list the card if you have any personal liability on it. If your company shoulders that entire burden, and you have no responsibility for the account, you shouldn’t list the card.

    If youre not sure whether youre responsible for payment, your human resources department should be able to clear that up.

    But this may clue you in: if your employer did nothing more than hand you a card and tell you what you could purchase with it, its probably a company-issued card that carries no individual liability.

    Calculate The Amount Of Nonexempt Property You Own

    Depending on your income and assets, Chapter 7 bankruptcy may not be ideal for you. If you own a lot of property, the bankruptcy trustee can sell your assets to pay off your creditors.

    Under Chapter 13 bankruptcy, you will keep all of your assets, but will have to pay creditors, the amount equal to the total value of your nonexempt assets.

    Be sure to review the bankruptcy exemption laws in your state to decide whether filing for bankruptcy is in your best interest.

    Generally, you should stop making credit card payments once you have begun the process of filing for bankruptcy. However, if you have not yet decided whether bankruptcy is right for you, continue making payments on your credit card to avoid harassment by creditors and additional damage to your credit.

    As always, the bankruptcy attorneys of Burr Law Offices are here to help with any and all of your bankruptcy concerns. Give us a call today.

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    Schedule Your Free Consultation With An Experienced Nj Debt

    Find out whether bankruptcy is the right choice for you. Call the law firm of John Hargrave and Associates to schedule your free consultation. You may also e-mail us to schedule your appointment.

    We are a debt-relief agency. We help people file for bankruptcy relief under the bankruptcy code.

    Our Practice Areas

    Chapter 7 Vs Chapter 13

    How to Pick the Best Bankruptcy Software

    Chapter 7 and Chapter 13 bankruptcies are the two most common types of consumer bankruptcies. The process for each is different, as is the length of time they remain on your credit report.

    In a Chapter 7 bankruptcy, also known as straight or liquidation bankruptcy, there is no repayment of debt. Because all your debts are wiped out, Chapter 7 has the most serious effect on your credit and will remain on your credit report for 10 years. The accounts included in the bankruptcy, however, are removed from the credit report earlier than that.

    In a Chapter 13 bankruptcy, your debts are restructured and you typically pay a portion of them over three to five years. A Chapter 13 bankruptcy is deleted seven years from the filing date and has a lesser effect on your credit than Chapter 7.

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    Qualifications For Filing Bankruptcy For Credit Card Debt

    If you want to file Chapter 7 or Chapter 13 bankruptcy, there are qualifying standards to meet, most of which are intended to determine whether a consumer is capable of handling the debt themselves. People wanting to file Chapter 7 bankruptcy must pass a means test and those trying to file Chapter 13 have strict amounts of debt they cant exceed.

    The means test for Chapter 7 involves two considerations. You can pass the test if your income over the previous six months is under the median income for your family size in the state you live. The majority of Chapter 7 filers pass the means test this way.

    If you dont, then you move on to the second consideration: Is there enough income left over to pay down your debt, after deducting expenses for essential items like rent, food, clothing, transportation, utilities, etc.

    If there is enough money left, you will be dismissed from Chapter 7 and referred to filing for Chapter 13. If there isnt enough money left over, you may qualify for Chapter 7.

    In Chapter 13, the qualifying debt amount for an individual cant exceed $419,275 for unsecured bills and $1.257 million for secured debt . Be careful with both categories of debt. If you have fallen behind on payments, your totals may exceed the allowed amount.

    Filing Bankruptcy On Credit Cards Only

    Filing bankruptcy just to eliminate credit card debt is not practical for one reason: You must include all debts when you file bankruptcy. Thats true whether youre filing Chapter 7 or Chapter 13.

    So, if you had no other debts, there are better options for paying off , like debt management or debt settlement programs, that wouldnt be as drastic or have as much negative impact as bankruptcy.

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    Check Your Credit Reports

    Pull your credit reports from the three major credit bureaus Experian, TransUnion® and Equifax® and verify that the accounts included in your bankruptcy are reporting accurate information. You can get one free report per bureau every 12 months at AnnualCreditReport.com.

    Accounts included in your bankruptcy dont have to be deleted from your credit reports. But they should indicate they were included in bankruptcy. You should also see no balances, past due amounts or late payments after the bankruptcy filing or discharge date.

    Since youll need to wait for your credit reports to update, heres when to check:

    • Chapter 7 bankruptcy: 90 days after your bankruptcy filing date
    • Chapter 13 bankruptcy: 90 days after your bankruptcy discharge

    If you come across errors on your credit reports, even outside of the bankruptcy accounts, youll need to dispute them directly with the credit reporting agency. Wait to apply for new credit until the errors are cleared. Credit errors could make it difficult to qualify for new credit cards or loans and whether you receive good rates and terms or not.

    MoneyFactCheck Your Scores

    You can also check your credit scores using free services offered by some credit card issuers and websites.

    Will I Be Able To Get A Credit Card After Bankruptcy

    Filing bankruptcy on credit cards

    Believe it or not yes. Creditor companies often send debtors offers for credit cards after they filed for bankruptcy knowing that it will be 8 years before they can file for bankruptcy again. Additionally, bankruptcy will illuminate all of your unsecured debt making your debt to income ratio more attractive to lenders who see that you now have the ability to take on new debt. This is not to say that filing for bankruptcy is good for your credit, because it is not. However, consumers emerging from bankruptcy commonly receive offers for cards in the mail very soon after their bankruptcy case has closed. For more information see: Can You Keep a Credit Card After Filing for Bankruptcy?

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    Consolidate Credit Card Debt With An Experienced Professional

    When considering how to pay off credit card debt, one way is to pursue credit card debt consolidation. An experienced debt consolidator will combine all your debts into one and secure a lower interest rate. Its often much lower than the average rate you are currently paying. Furthermore, you may also want to consider other debt-relief options such as debt settlement if you have more debt than you can handle. These options can reduce the amount of debt you owe, allowing you to get out of debt sooner.

    Eliminating your credit card debts will help your budget and let you breathe easier. To get started, you can fill out this online debt relief application, and a trained debt consultant will provide you with a free debt consultation to help you get out from under your debt.

    Restrictions On Obtaining Credit During Bankruptcy

    Obtaining credit during bankruptcy can be challenging. If you file for a Chapter 7 bankruptcy, you can apply for credit as soon as the debt is discharged. With Chapter 13 bankruptcy, you will need to receive prior approval from the court or Chapter 13 trustee. Additionally, your plan payment must be current at the time of the request.

    If you would like to get new credit during your Chapter 7 or 13 bankruptcy case, you should consult an experienced Cleveland bankruptcy attorney at Luftman, Heck & Associates. We will explain your situation to you and help you understand obtaining credit during bankruptcy.

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