Why You Can’t Get Rid of Credit Card Debt
The average American has about 10 credit cards. Conflicting national surveys put that number even higher, and it’s a safe bet that thousands carry more plastic than they can reasonably afford to manage from month to month. In tough economic times, that’s what happens; a kind of debt shell game where cash-strapped consumers end up rotating credit cards to pay debts that are more pressing. Before they know it, they’re underwater on over-the-limit and late payment fees. How can bankruptcy help manage credit card debt? As our bankruptcy attorneys point out, it depends on your own financial situation.
What is Unsecured Debt?
A credit card is a type of unsecured debt. This means the creditor has not attached the balance owed to any real property such as a car or house. If you don’t pay, the bank usually can’t waltz in and seize everything you’ve purchased with their card. Because the debt is unsecured, it’s easier to reduce or remove through bankruptcy, either Chapter 7 or Chapter 13. Don’t get your hopes up just yet. There are several more hoops to jump through before you get to expunge those annoying Visas and MasterCards from your credit profile.
How Household Income Affects Debt Expungement
To qualify for Chapter 7 bankruptcy, the type of “no asset” filing where you can expunge most of your debts, you must pass your state’s means test. If your income is less than the median income level for the state where you live, you pass and may file this type of bankruptcy protection. If it exceeds this mark, you’re most likely ineligible and must file Chapter 13. The court could also convert your filing into a Chapter 13, and instruct your attorneys to come up with a plan to repay your debts. Make certain you’re only applying for Chapter 7 protection if your income is insufficient to pay your current and obligations and you possess very limited personal assets. The court will liquidate (sell) any real property that you can’t exempt under your state’s laws. The court does not look kindly on debtors trying to “beat the system” by attempting to conceal their finances.
Making Payments to Pay Off Debt
As it turns out, some consumers have a credit rating that is just too good for Chapter 7 liquidation. Chapter 13 bankruptcy is more a debt restructuring. Whereas in Chapter 7, the court could erase your credit card debt, here you must come up with a short-term plan to pay them off. The court may still expunge any remaining debts after the repayment period, provided you meet all the court’s due dates.
This is the better route to proceed if you’re looking to retain real property, including a home or business, and you just need the court to step in to assist you in addressing your debts.
Our Philadelphia and Bucks County Bankruptcy Attorneys Can Help
Financial stress creates the worst kind of anxiety and sleeplessness. If you’re ready to end the phone calls from creditors and constant harassment, call an experienced bankruptcy lawyer at the law offices of Young, Marr & Associates today. We can guide you through the liquidation or restructuring process and provide the most effective path to resolving your financial difficulties.