Credit card debt is a huge reason people end up filing for bankruptcy. The incredibly high interest rates alone plus the ease of procuring cards contribute to what can be a vicious cycle of maxing out limits, paying only minimums, and applying for more cards. And often this cycle can have long-term negative effects on family relationships.
Many cardholders unable to pay their debt wind up filing for bankruptcy which may be a good answer to big financial problems. But can you file for bankruptcy on credit cards only? The short answer is no. Read on to find out why.
Can I Declare Bankruptcy for Credit Card Debt?
When you file for bankruptcy whether Chapter 7 or 13, you are required to list all debt, both secured and unsecured. You aren’t allowed to pick and choose which debt you want the bankruptcy to apply to.
Briefly, unsecured debts are not backed by any collateral and include things like credit card balances and unpaid medical bills. Creditors cannot reclaim any of your property if you default on a loan.
However, secured debt means the borrower has put up collateral (e.g. a car or their home), and agrees that they will repay the loan in a timely fashion or else the lender will gain ownership of the collateral they used to get the loan.
When Should I Consider Declaring Bankruptcy?
Asking yourself some questions may help bring clarity:
- How far behind am I on payments?
- What is my total credit card debt?
- What are the interest rates on each of my cards?
- What other debt am I currently carrying?
- Has my credit score gone down?
- Will my total income increase or decrease in the near future?
- What other debts do I owe? (Including past-due mortgage or rent payments, car loans, student loans, personal loans, medical bills, payday loans, and lines of credit)
If you’re just a few payments behind on a loan or credit card, and you can say with confidence that you can catch up, bankruptcy for credit card debt might not be the right answer for you. There are other options including credit counseling, creating a debt management plan, and taking out a debt consolidation loan.
However, if the answers to the above questions reveal just how serious your debt situation is, and you feel like you’re drowning, that’s a good indication that bankruptcy may be the right solution for you.
Do I Need a Lawyer to File for Bankruptcy?
While it’s perfectly legal to file on your own, the bankruptcy process and the laws governing it are complex, and you may be doing yourself a grave disservice if you choose not to hire a lawyer.
Are There Lawyers Who Can Help with Bankruptcy?
The answer is yes. A bankruptcy lawyer is who you want for the best outcome. You’ll need a lawyer well-versed in bankruptcy laws, local rules of the court in your area, required paperwork, and optimal timing. An attorney who does not have experience in bankruptcy law may not have the knowledge to ensure you qualify for bankruptcy.
At the end of the day, to protect yourself and those you love, talk with an experienced bankruptcy attorney, disclosing all debts and creditors from credit card companies to mortgage lenders.
The Indiana bankruptcy attorneys at Sawin & Shea, LLC have been navigating the bankruptcy process for years. If you’re considering filing for bankruptcy, we invite you to call us at 317-759-1483 or request your free consultation online.