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Credit Card Debt and Chapter 7 Bankruptcy Filing

Credit Card Debt and Chapter 7 Bankruptcy Filing

Credit card debt is a billion-dollar problem in America. Large credit card debt is always a cause of concern for an individual. Thus, a lot of people file for Chapter 7 bankruptcy to remove their credit card debt quickly and with minimal repayment of debts owed.

What are the possible consequences of having credit card debt?

If you fail to pay your credit card debt on time, you could face harassing debt collection calls, bad credit, and lawsuits. For example, missed payments often motivate credit card companies to raise your interest rate. The credit company could also charge late fees for unpaid debt. Sometimes, the credit company could also turn your account to a debt collector. Thus, you should always consider ways to either pay the debt or remove this debt off your card, and filing for Chapter 7 bankruptcy is a good way out.

Why is Chapter 7 filing always a good option?

It is often a challenging task to keep on paying your credit card debt each payment cycle, and on average, it takes over ten years to clear all of an individual's credit card debts. Secondly, if you miss even a single payment or are late to it, then the credit card company raises your interest rates.

In such scenarios where the credit card debt keeps on rising, a Chapter 7 bankruptcy filing is a good option because it always removes almost all of your debts barring a few exceptions. If your debts get out of hand, then Chapter 7 can undoubtedly come to your rescue.

Credit Cards Debt that does not get removed by a Bankruptcy filing

You have to always keep in mind that there are certain transactions that a bankruptcy filing cannot erase. A bankruptcy court could find non-dischargeable transactions, including purchases of luxury items, fraudulent transactions, and payments made for alimony, student debts, and child support.

Contact a Sacramento bankruptcy attorney to find out how you can eliminate your unsecured credit card debt.

Rebuilding Your Credit Score after Bankruptcy

Rebuilding Your Credit Score after Bankruptcy

A common bankruptcy myth is that filing bankruptcy will ruin your credit for the future. The truth is, many people find their overall credit starts improving following a bankruptcy. While bankruptcy will be recorded on your credit score for up to ten years, it is not the end of the road for obtaining credit. You can slowly rebuild your credit score and return to your financial life before bankruptcy, along with some discipline and patience.

Consider a co-signer

Co-sign with a family member or friend to be qualified for better cards or loans and re-establish your credit much more quickly. When choosing this option, you should sustain an absolute payment record going forward, not only for your sake but also to protect your co-signers credit report.

Maintain the payment of your non-bankruptcy accounts

Do not neglect your other accounts that are not integrated into your bankruptcy, such as student loans. Any active non-bankruptcy accounts will eventually continue to affect your credit score, so try to pay any existing loans on time.

Solicit new credit frugally

A portion of your credit score depends on the number of new credit applications you make. Do not try to apply for various credit card or loan applications at once, especially when you get rejected because you might be seen as desperate for credit. Instead, focus on paying off your existing debts and try applying again after six months or so.

Avoid job hopping

Recurrent job changes will not influence your credit score, although lenders look beyond your credit report while you are applying, particularly after a bankruptcy. Holding many jobs in one year might show that you have issues with discipline or responsibility. You will not be the kind of borrower on whom a lender can rely on. On the contrary, if you have a stable job and you have maintained it for a while, it might be seen as a sign of stability so that it can swing a decision in your direction.

Take the process slowly. Don't be in a rush, so you don't find yourself surrounded by mistakes that will just postpone your credit repair progress. It will indeed take a few years, but you can eventually win back an excellent credit score.

If you would like more information about bankruptcy, contact a Roseville bankruptcy attorney today.

Credit Card Debt and Bankruptcy

Credit Card Debt and Bankruptcy

Credit card debt is a significant problem in the United States. Americans owed over a trillion dollars in credit card debt in 2019.

The Credit Card Accountability Responsibility and Disclosure Act of 2009 put federal rules and regulations on the use of debit cards. Financial institutions have lost income due to excessive bank fees no longer being allowed. Consumers must agree to overdraft before they can be charged an overdraft fee.

Encouraging Credit Cards

Banks are encouraging shoppers with great promotion rates, and 0% offers to obtain new credit cards. Banks receive more profit from credit card usage, than from debit cards. If consumers are hooked on credit cards, banks can replace the debit card usage fees in overdraft charges for interest rates and fees on the credit cards.

Cycle of Debt

One of the most common causes of financial issues is credit card debt. It can start a cycle of purchasing everyday items on your credit card when you have run out of paycheck. You tell yourself you will pay the balance at the end of the month, but often only the minimum amount due gets paid.

Bankruptcy can help you eliminate your credit card debt and stop the harassing phone calls and texts and emails regarding your credit card debt. A court order called the automatic stay protects you from any further collection activities while your bankruptcy case is active. If the creditor does not stop collection attempts made against you, you can take them to court, and they may be found in contempt and face penalties.

Contact a Roseville bankruptcy attorney to find out how you can eliminate your credit card debt today.

Bankruptcy and Your Credit

Bankruptcy and Your Credit

People are often hesitant about filing bankruptcy because of what it will do to their credit. They know that a bankruptcy can stay on your credit report for ten years. They should also consider that being behind in their payments can cause a negative impact on their credit report.

Things like late payments, over the limit balances, default on payments, foreclosures, evictions, repossessions, all stay on your credit report for at least several years. Prospective lenders will not look favorably on these negative marks and would weigh them along with a bankruptcy in terms of credit favorability.

If you are overwhelmed with debt, your credit score may not be the most important thing to worry about right now. If a lender sues you for nonpayment, it may be able to get a court-ordered judgment against you. This can involve a lien on your home or wage garnishment. None of those actions taken against you will help you get out of debt.

Bankruptcy

Instead of ignoring the calls and letters from creditors, you may want to consider filing bankruptcy. The creditors won’t go away, but bankruptcy can eliminate the legal obligation to pay on much of your debt. Your unsecured debt like credit cards, medical bills, payday loans, past utility bills, and personal loans can all be discharged in as little as four to six months in a Chapter 7 bankruptcy liquidation.

Saving your Home

If you have received notice of an upcoming foreclosure sale, a Chapter 13 bankruptcy may help you keep your home or other secured debt like a car. You can attempt to retain your assets in a Chapter 13 bankruptcy case if you are able to pay the arrears with a court-approved payment plan for three to five years. At the end of the payment period, any remaining unsecured debt will be eliminated.

Getting Credit

If, after bankruptcy, you pay your bills on time for a couple of years and do not acquire more debt, lenders will start to look more favorably on you when you apply for a loan. By avoiding the “No Credit, Bad Credit, Ok” lenders with their high-interest rates and unfavorable terms, you can set yourself up for better credit opportunities in the near future.

If you have more questions about your credit and bankruptcy, contact an Elk Grove bankruptcy attorney today.

Credit Card Debt in Chapter 13 Bankruptcy

Credit Card Debt in Chapter 13 Bankruptcy

Credit card debt is one of the most prolific types of consumer debt in California. In fact, the total credit card debt in 2018 for Americans exceeded $1 trillion. For the first time in history, this equates to an average household credit card debt figure of over $8,600. As such, individuals commonly approach a California bankruptcy attorney to discover if Chapter 13 bankruptcy can help them with troublesome credit card debt. Chapter 13 bankruptcy, or "reorganization bankruptcy" allows an individual to establish a repayment plan while eliminating or discharging any remaining amount at the end of that repayment plan. A Chapter 13 discharge can be quite helpful in dealing with excessive credit card debt.

How Credit Card Debt is Prioritized

Chapter 13 bankruptcy is helpful in eliminating credit card debt because of its ability to reduced unsecured debt within the US Bankruptcy Courts. When you file for bankruptcy in California, the bankruptcy trustee divides up your debt into three different debt classifications called priority debt, secured debt, and unsecured debt. This is the actual order that you must pay your debt, with priority debt and secured debt repayment being required. You pay back unsecured debt last but only if you can still afford to do so. Credit card debt falls into the category of unsecured debts, although some credit card companies can and will create credit agreements which are secured. For this reason, read your original credit card agreement to ensure that it is, in fact, an unsecured agreement.

How Much Credit Card Debt is Paid Back

How much credit card debt you will have to pay back in Chapter 13 bankruptcy depends on how much money you earn before and during your Chapter 13 repayment period. Your credit card debt repayment amount is also contingent on the amount of priority debt and secured debt you owe. To calculate how much of the credit card debt you will be liable for in Chapter 13 bankruptcy, look at your overall budget. Consider how much you can afford to pay based on income and expenses and deduct the amount of priority debt and secured debt that you intend to pay in the future. Any money left over from your Chapter 13 repayment amount goes toward paying back your unsecured debts. The balance between this amount and your credit card debt is discharged at the successful conclusion of your California bankruptcy.

Avoiding Lawsuits

Creditors have the right to file a lawsuit against consumers to force them to repay a debt by obtaining a judgment in a civil court. If you are currently being sued over a credit card balance, time is of the essence. Filing bankruptcy offers a consumer an automatic stay which can stop a credit card debt lawsuit in its tracks, but it is much easier to discharge this debt using bankruptcy than it is to clear up a lien on your property because of a judgment. Contact a Sacramento bankruptcy attorney if you have received a summons to court because of credit card debt to avoid further adverse actions.

Credit Card usage before Bankruptcy

Credit Card usage before Bankruptcy

A typical question we hear revolves around credit card usage before bankruptcy. Specifically, individuals want to know how using a credit card with the months leading up to filing for bankruptcy protection can affect the filer’s ability to discharge the debt. This is something that is very strongly discouraged as getting cash advances from credit cards, or using your credit card to charge luxury items may be exempted from discharge during your bankruptcy, leaving you stuck with the bill. The U.S. Bankruptcy court generally considers purchases over $675, “luxury items”.

Intent to Pay

If you use your credit card with no intent to pay for the items, the law presumes that these charges are fraudulent. Items obtain using fraud are not dischargeable in a bankruptcy, and it is much easier for a creditor to prove in a court of law that you never intended to pay for luxury items that were purchased using a credit card within 90 days of filing bankruptcy. The only way that this type of purchase can truly be discharged, is if an unforeseen life event pushed you into bankruptcy after making the purchases.

Cash Advances

When filing for bankruptcy protection, any cash advances totaling more than $950 within 70 days of bankruptcy may be exempted from discharge as well. The total amount must have come from one creditor and must have been used for consumer purposes and not business related. If these two standards aren’t met then the debt may be dischargeable.

Credit Card Debt in Bankruptcy

Credit Card debt in bankruptcy is typically the lowest priority for repayment, however, any debt incurred with your credit card debt by fraud will have to be repaid. It’s important to note that even if you didn’t intend to defraud your creditors by spending money on your credit card before a bankruptcy, the court may be inclined to believe that you have committed constructive fraud and will require you to pay back the credit card debt.

If you have made a number of purchases or taken out cash advances on a credit card it is typically a good idea to stop charging and wait before declaring bankruptcy. It’s important to discuss your credit card debt thoroughly with your Sacramento bankruptcy attorney before filing, in order to have a greater chance of your bankruptcy case being confirmed. Additionally, it’s important to be completely honest about your debt with your bankruptcy lawyer, as well as, the bankruptcy trustee in order to prevent your bankruptcy case being dismissed completely.