Credit Card Debt Administration Help - How to Know When Bankruptcy is a Choice

Due to the adverse effect that bankruptcy filing has on your credit rating score

and its long term repercussions, it is always advisable to consider other options like debt consolidation or debt settlement before thinking of filing for bankruptcy. Bankruptcy information stays on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job. Filing for bankruptcy is not a suitable option for debtors who owe small sums of money as even the cost of hiring a bankruptcy attorney may exceed the amount of debt.

However, for debtors who owe very large amounts of credit card debts and are not in a position to offer creditors a monthly payment through a debt relief program, filing for bankruptcy may be a good option. A bankruptcy petition puts an automatic stay on creditors to stop collection efforts. Therefore, it provides a fresh start to people who who have gotten into financial difficulty and can't satisfy their debts.

There are two kinds of Bankruptcy filings - Chapter 13 and Chapter 7. Chapter 13 is a better option for people who will be able to repay lenders while holding onto their home and other belongings. The court allows you to use your future income to pay off your debts during a 3-5 year period, while assets remain protected. After all payments are made, your debts are discharged. Chapter 7 is also known as straight bankruptcy, as it wipes clean all unsecured debt while your future income is not affected. Unsecured debt may include automobiles, work-related tools, and basic household furnishings. Some of your assets may be sold by the court or turned over to your creditors.

However, not all debtors are eligible to file for bankruptcy. Debtors who have filed within the last eight years will not be eligible for a Chapter 7 under the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act.

They also need to undergo a "means test" involving complex calculations, with a basic requirement that the debtor's income should be below the median for the state they live in. A bankruptcy lawyer will be able to guide you on the calculations. The waiting period under Chapter 13 is generally two-three years between filings and hence is considered a better option if you have filed for bankruptcy earlier.

Credit Card Debt Administration Help - How to Know When Bankruptcy is a Choice

By: Caleb Byron

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