Can bankruptcy can be used to get rid of credit card debt?
As a result of recession many individuals with credit card debt are losing their job and income required family maintenance. With loss of income, families started to live on credit cards to pay for their necessities. For this reason credit card debt mounted for not clearing the debt incurred every month. Many have incurred over $20,000 in credit card debt and that huge debt began to create problem in the form of late fee, interest getting added faster when you are unable to make at least minimum payments.
If your credit card debt becomes unmanageable, then bankruptcy may be an option for you to get rid of debt. Filling bankruptcy can help the individual in getting out of debt by reducing or eliminating balance outstanding, fee and interest accrued.
Not every individual is allowed to file bankruptcy nor he/she is eligible to file bankruptcy. For this reason, a personal bankruptcy filed under the US bankruptcy code is evaluated by the bankruptcy court in terms of your income and assets to determine under which chapter of bankruptcy you are eligible to file under.
There are two types of bankruptcy code are available. They are chapter 7 and chapter 13. The main difference between chapter 7 and 13 is that, the chapter 7 bankruptcy allows you discharge credit card debt while chapter 13 allows you to reduce credit card debt balance and fee to repay at your convenient schedule. It means even if you file bankruptcy, the individuals require to participate in a repayment plan to get rid of debt.
Then how filling bankruptcy is helpful to an individual to get rid of debt? It is similar to other options debt settlement or short sale. In chapter 7 bankruptcy allows you to discharge credit card debt but the problem is when you file for chapter 7 bankruptcy, all your assets are liquidated and the proceeds are used to pay off the creditors.
On the other hand chapter 13 bankruptcy does not liquidate you assets instead it allows you to build a repayment structure which is very similar to debt settlement or credit counselling options. With debt settlement or debt management options you can establish repayment plan between you and your creditors according to your convenience.
If this is the case, then why file bankruptcy and spoil your credit for almost 10 years and put a remark of filling bankruptcy on your credit report. Hence before filling bankruptcy it is also necessary for you check the statue of limitations of your credit card debt because the statue of limitations state that the debt becomes void after certain period of time after it is incurred and the debtor is not obligated to repay the debt after certain time.
If your credit card debt is older than your state’s statue of limitations for credit card debt, then you are no longer obligated to repay the amount. Hence filling under such conditions will lead to different consequences. To avoid such consequences, it is advisable to hire a bankruptcy attorney who is experienced in dealing bankruptcy cases for your advantage.