Bankruptcy and Credit Card Debt

Do you feel overwhelmed by credit card debt? It's a situation that many people find themselves in. The average credit card debt in the United States is $6,741 per household and there are many people with substantially more credit card debt than that. But when should you decide that enough is enough and that you should declare bankruptcy? Read on to find out what you need to know about credit card debt and declaring bankruptcy.

Credit card debt can be negotiated, settled, and managed. There are avenues in place to help you, though it does mean that you will likely need to shut down your credit card accounts and go without credit cards as your credit recovers.

Many creditors are willing to settle a debt for a percentage of the amount owed, or even lower your interest rate which can help you pay off the remaining balance.

If it's possible for you to repay the debt, then you likely won't qualify. But possible is a relative term in relation to your income. If paying off your debts puts you near or at the poverty line, then it isn't really possible for you to repay the debt. This is considered to be significant financial hardship, which is what bankruptcy proceedings are intended to avoid.

To know whether you qualify for debt, you'll need to meet with a bankruptcy attorney. They will go over your finances, income, and expenses, to determine whether you are financially able to repay the debts that you have.

This is an important step because there are many factors to consider. For instance, if you could pay off your debts if you downsized significantly, you may still not qualify.

If your creditors are already attempting to reclaim their money from you in court, bankruptcy is often the best option. Bankruptcy temporarily halts any legal action against you regarding your debts, making it possible for you to get some breathing room and consider your options. If you're already going to collections, your credit score is already likely to be bad. A judgment against you is going to hit your credit report, just as a bankruptcy would.

On the other hand, if you're current on all your credit card payments, and simply feel overwhelmed, the situation may still be manageable. It depends on how well you're paying your debts and whether you can continue to do so without suffering from extreme financial duress.

When most people think about bankruptcy, they think of Chapter 7 - a complete dissolution of their debts, in addition to a dissolving of their additional assets. But Chapter 13 bankruptcy can be useful for credit card debt. During Chapter 13 bankruptcy, your debts are restructured under different terms, with the goal of having those debts paid off in a specific amount of time.

During Chapter 13 bankruptcy, your credit card terms will be renegotiated to be easier to pay off, much like a payment plan or a settlement. Your creditors will then be guaranteed regular payments on a scheduled basis.

Since there are many gray areas and there's no clear line between too much debt and a manageable amount of debt, it's often best to speak with a professional. A bankruptcy attorney will help you decide whether your credit card debt is enough that you should file for bankruptcy. For more information, contact Custer, Custer and Clark LLC , Attorneys at Law.