Credit Card Bankruptcy
Credit card bankruptcy accounts for nearly 33-percent of all bankruptcy filings within the United States. According to the National Foundation for Credit Counseling, a survey conducted in 2006 by the Panel Study of Income Dynamics revealed nearly two-thirds of debtors stated their primary reason for filing bankruptcy stemmed from poor money management and misuse of credit cards.
The extensive abuse of credit card bankruptcy filings was the catalyst for new bankruptcy laws enacted in 2005. The Bankruptcy Abuse Prevention and Consumer Protection Act made filing bankruptcy a complex process. BAPCPA includes provisions stating Americans who file for bankruptcy protection must undergo credit counseling and repay a portion of their debts
Prior to BAPCPA, many consumers racked up credit card debt, than filed for Chapter 7. This chapter of the United States Bankruptcy Code allows debtors to liquidate non-exempt assets to repay creditors. Outstanding balances were discharged and the debtor was able to make a fresh financial start.
Today, the majority of Americans filing personal bankruptcy are required to seek debt relief through Chapter 13 bankruptcy. Chapter 13 requires debtors to repay debts over a period of three to five years. A large percentage of the debtor's disposable income must be contributed to the repayment plan.
If the debtor is unable to adhere to the repayment plan, credit card companies and creditors can petition the court to have the bankruptcy dismissed. When this occurs, the debtor fails out of bankruptcy and loses all protection through the court.
Even when credit card bankruptcy is discharged through the court, bankruptcy remains on credit reports for up to ten years. This negative blemish can end up costing the debtor considerably more than a negative credit history.
First and foremost, obtaining future credit of any sort will be exceptionally more difficult. If the debtor is able to obtain credit at all, they will soon discover it will cost them much more. Individuals who file credit card bankruptcy will pay higher interest rates and are oftentimes charged outlandish fees to obtain credit cards.
Insurance companies check credit reports and charge higher premiums to individuals who have filed bankruptcy. Obtaining a mortgage loan after filing bankruptcy is nearly impossible. Auto loans generally cost more because filing bankruptcy places consumers in the "high-risk" category. In essence, filing bankruptcy costs considerably more than most people realize.
Prior to filing credit card bankruptcy consider all bankruptcy alternatives. These can include debt consolidation, debt management, debt settlement, credit counseling and budgeting. Use caution when working with organizations who claim they can settle credit card debts for pennies on the dollar.
Many debt management companies charge exorbitant fees to negotiate debts, but offer no guarantee on the outcome. Debtors could potentially pay a large sum of money for debt negotiation services only to have the creditors refuse acceptance of their offer.
If you are facing bankruptcy due to credit card debts, contact Simon Volkov to determine what options are available. Additionally, we invite you to peruse our comprehensive article database to learn more about bankruptcy and bankruptcy alternatives.