People file for bankruptcy because of many different circumstances. In most of the cases, bankruptcy is filed for by a person who is experiencing acute financial hardship and is not able to repay his or her debts. For any individual struggling with debt, and he or she can’t pay, one of the most affordable ways to get out of debt is a Chapter 7 bankruptcy case.
If you fall behind in the regular payment schedule of your credit card, there can be several consequences. Initially, the company issuing the credit card may raise your rate of interest. This means that out of the payment that you make each month, a lesser amount goes to your actual account balance.
The credit card company will also start charging penalties such as late fees, over-the-balance fees, etc. Unfortunately, all these penalties will increase the amount that you need to pay back to them. In some cases, the credit card issuer may also engage a debt collector to deal with your credit card account. This is really bad news because these debt collectors are extremely persistent in their pursuit of the debt and may not hesitate to harass you at home or call you at work repeatedly. It is common for people to file a Chapter 7 case because of creditor harassment.
Debt Collection Lawsuit:
If you fail to pay your credit card debt, to recover the same, the card issuer may file a debt collection lawsuit. If a lawsuit is filed against you for credit card debt, your response time can be very short. Please note that it is not a good idea to ignore the credit card lawsuit because if you do that, the company can file a motion requesting a default judgment from the judge. The default judgment will clearly state that you are responsible for paying off the credit card debt. In most of the states, the judge will also allow the card issuer to add the fees of the attorneys and other related expenses.
Chapter 7 Bankruptcy for Credit Card Debt:
Chapter 7 bankruptcy is a great option for individuals with high credit card debt because it eliminates almost all credit card debt you may have. Therefore, if you believe that what you owe is a lot more compared to what you can pay, Chapter 7 credit card bankruptcy can help you get back on your feet.
If you are only paying the minimum amount every month to your credit card account, depending on the interest rate and card balance, you may require as many as 10 or 15 years to pay off the debt completely. This payment policy can cost you thousands of dollars that you don’t really need to pay.
Typically, credit card debts are considered to be unsecured loans because there is no property to secure the amount you owe. In simpler words, if you fail to pay, the credit card company doesn’t have the option to foreclose on your home or repossess your property. Instead, you are only required to pay back the money.
Chapter 7 bankruptcy petitions generally cover almost all types of unsecured debts including credit card debts as well as personal lawsuits for debt collection. Once a debt is discharged in bankruptcy, you are no longer responsible for paying off that particular debt. Moreover, the creditors are not allowed to initiate any measures or actions to recover a debt that has been discharged.
Please note that in order to qualify for a Chapter 7 bankruptcy case, your average income must be below the median income of your state. If you fail to qualify for Chapter 7, you may still consider filing for Chapter 13. Here, a repayment plan is created instead of erasing the debts. Most of these repayment plans have a duration of 60 months.
