Chapter 13 Bankruptcy And Credit Card Debt
Depending on your situation, Chapter 13 bankruptcy might make sense. This type of bankruptcy involves partially or fully repaying some creditors. It involves a specialized payment plan, which might be anywhere from threeto five years. In most cases, a portion of unsecured debt is paid with Chapter 13 bankruptcy. Credit cards are great examples of unsecured debt. When determining how much money youll pay, several factors are considered. A major factor is the amount of disposable income you make. The majority of individuals who file for Chapter 13 bankruptcy must only pay a tiny percentage of their unsecured debt. When the repayment period is over, remaining credit card balances are discharged.
What Happens To My Debt If I Declare Bankruptcy In Canada
Bankruptcy will eliminate most of your debts, such as unsecured debts including credit card bills, medical bills, and payday loans. You may still be required to pay your secured debts, such as your mortgage or motor vehicle loan.
Some debts cannot be eliminated by your bankruptcy. Those include:
- Court-imposed fines
- Debt incurred by misrepresentation
- Alimony or maintenance payments
- Debt for damages imposed by Civil Court for intentional bodily harm, sexual assault, or wrongful death
- Student loans, if bankruptcy occurs within 7 years of ceasing full- or part-time studies
A Licensed Insolvency Trustee Can Advise You
Does bankruptcy clear all debts? Not in all cases, but it does provide a new starting point and relief for most unsecured debts. Bankruptcy can be a complicated topic, but help is available. For more information on whether bankruptcy is a good solution for your situation, contact a Licensed Insolvency Trustee for a no-charge consultation.
Read Also: How To Buy A Car After Bankruptcy
What Happens When You Get Behind On Your Credit Card Payments
If you fall behind on your credit card payments, several things may happen. The credit card company may raise your interest rate, which means less of your payment each month applies to the account balance. They can also charge late fees and other fees, like over-the-balance fees which increase the amount you owe. The company may also turn your account over to a debt collector. Debt collectors can be extremely persistent in their pursuit of the debt, including calling you at work and harassing you at home. is another common reason people file Chapter 7 bankruptcy cases.
Be Careful With Cash Advances Before Filing
Cash advances on your credit card can also be a negative factor when you file for bankruptcy. The debt is not discharged if you take out over $950 in cash advances 70 days prior to filing for bankruptcy. This stands regardless if you use that advance for essentials or luxury purchases.
There is an exception for the cash advance penalty. For example, lets say you took out a cash advance to repay student loans. You then get diagnosed with a severe medical condition that renders you unable to work, so you file for bankruptcy. Because you are unable to repay this debt due to extreme hardship, it will be discharged. Note that if you took out the cash advance to pay your student loans intending to discharge the debt in bankruptcy, you can be sued for nondischargeability.
Connect with top-rated bankruptcy attorneys to make sure you avoid issues when you file.
However, if you can prove that the recent purchases are necessary items, such as heat for your home and medical expenses, those may qualify for discharge.
Also Check: File For Bankruptcy And Keep Car
With Both Chapter 7 And Chapter 13 You May Be Able To Keep Your Home
So, while Chapter 7 and Chapter 13 bankruptcy are different, both can allow you to keep your home. And, because credit card and other debts are eliminated, making mortgage payments after bankruptcy will be easier.
Be aware that exemption laws do not protect all property a bankruptcy filing does not discharge all types of debts and there are different classes of creditors that may be able to seize your property. The attorneys at Fesenmyer Cousino Weinzimmer understand each of these distinctions and can provide the best legal advice to protect your assets. Call us for help today.
How Bankruptcies Work In Canada
Your bankruptcy begins when you file for bankruptcy with a Licensed Insolvency Trustee , as they are the only professionals in Canada that are licensed and regulated to administer bankruptcies. Your trustee settles all of your debts by paying the proceeds of your non-exempt assets to your creditors. A non-exempt asset is an asset that exceeds the equity limit set by your province. For example, if the value of your motor vehicle exceeds the limit set by your province, then your trustee can sell your car to repay creditors.
Alternately, if you would like to keep an asset that exceeds the exemption limit, you can make an arrangement with your creditors to buy back the asset by paying off the amount that exceeds the exemption limit.
Each province provides a list of exempt assets that you can keep regardless of the fact that you declared bankruptcy. While you are bankrupt, you will likely be required to make monthly payments to your trustee.
You May Like: How To Declare Bankruptcy In Va
Rewards Credit Cards Create More Debt
Post-bankruptcy debtors who sign up for credit cards which offer rewards such as cash back, may be at a higher risk for accumulating large amounts of debt. In a recent study which analyzed the spending habits of 12,000 credit card consumers, it was found that debtors who have rewards credit cards are likely to spend more and accrue more debt.
The initiation of a 1% cash rewards program yielded, on average, a $25 reward each month-and an increase in spending by $68 a month and in credit-card debt of $115 a month, the economists say in a paper to be presented at the American Economic Association meetings next week. ..In many cases, rewards entice people whose cards were dormant to start spending, the study found. About 11% of those who hadnt use their credit cards in the previous three months made purchases of at least $50 in the first month of the program.
Most Of What You Owe Are Secured Debtstypes Of Debts Not Included In Bankruptcy
Secured debts are those backed by collateral or an asset, such a mortgage or auto loan, whereas unsecured debts like credit card balances arent tied to any assets. Whether or not it makes sense to file for bankruptcy can depend on the types of debt of you have, because not all debts are included in a bankruptcy.
If most of your debts are secured, declaring bankruptcy may not provide the outcome youre looking for. Assets like a home or vehicle that has been pledged as security for a loan may have to be sold. Bankruptcy also wont discharge student loans that are less than seven years old, child support or spousal support payments, government overpayments, and court-ordered fines and restitution payments. However, bankruptcy will discharge unsecured debt, which include, but arent limited to, credit card debts, medical bills and collection amounts.
So before considering applying for bankruptcy with a trustee, assess your liabilities and determine which of your debts are secured. If the majority of your debts fall into this category, declaring bankruptcy may only wipe your slate clean if you give up most of your assets. If youre not okay with this, you may be better off with other options or alternatives solutions.
You May Like: Toygaroo After Shark Tank
What To Do After Your Bankruptcy Is Discharged
Once your bankruptcy is discharged, you should do the following:
- Pull your credit reports from Equifax, Experian and TransUnion to confirm that your lenders are accurately reporting the discharge. Only the debts included in the bankruptcy filing should be reported as discharged.
- Double-check that all of those accounts included in the bankruptcy show a zero balance on your credit reports.
- Consider applying for a new credit card once youve confirmed that your credit reports are accurate.
Even after your bankruptcy is discharged, it may take a while to qualify for a new credit card. Some credit card companies may reject your application simply because you have a recent bankruptcy on your credit report. Others may be less stringent because your risk of filing for bankruptcy again is low, since there are rules restricting when you can file for a second bankruptcy.
Can You Keep Any Credit Cards In A Bankruptcy
You typically can’t keep credit cards if you declare bankruptcy. Bankruptcy isnt a pick and choose proposition, and all creditors are to be treated the same. It wouldnt be fair for you to discharge that $5,000 balance you owe to First National Visa but keep the personal loan you borrow from the credit union at work.
When you file for bankruptcy, you need to report all your credit cards, even those with a zero balance. Creditors will learn that you’ve filed for bankruptcy, and many creditors subscribe to services that peruse the bankruptcy filings nationwide on a daily basis. They compare the filings to their own customer databases. In most cases, even if it has a zero balance, any active account that matches up to a bankruptcy case will lose its borrowing privileges immediately.
Any accounts you fail to list in your bankruptcy paperwork will not be discharged.
To be eligible for discharge, the creditor must receive notice of the bankruptcy. You cant list the name on the account without the address or provide incorrect information that would make it difficult for the creditor to identify the account.
Don’t Miss: Donald Trump How Many Bankruptcies
Should I File Bankruptcy For Credit Card Debt
If youre struggling with credit card debt reach out to one of our experienced bankruptcy attorneys. In a free consultation, well discuss your circumstances, your goals, and your options. The best way to win a lawsuit is to not have one filed against you. Experienced attorneys can assist in avoiding a credit card issuers challenge altogether.
Chapter 7 Bankruptcy And Credit Card Debt
When you file for Chapter 7, most of your debt can be discharged. However, Chapter 7 requires you to give up all of your non-exempt property. The trustee will sell the property and use the money to pay off creditors. Most credit card debt is viewed as non-priority, unsecured debt, so its discharged with Chapter 7. Tax debts and child support are two examples of priority debts, which cannot be discharged with Chapter 7 bankruptcy.
Although it doesnt make sense in most situations, its possible to file for Chapter 7 and reaffirm all debts except for credit card debt. In this situation, an individual is liable for reaffirmed debts when the bankruptcy is finished.
Your Financial Hardship Is Temporary Wait To File Bankruptcy
Many times financial hardship comes in waves. Although you may be living on the edge right now, perhaps your financial situation will improve in the next few months, with either a new job, a promotion, or an investment that paid off.
So if youre asking yourself if bankruptcy is a good option for you, realistically consider whether your financial problems are temporary or not. For example, if you recently lost your job, will you qualify for unemployment benefits? Do you have a good chance of getting another job in a few months? Do you foresee more cash flowing in over the next year or so? If you can see that that your current hardship might be temporary, you may want to wait and not enter into the bankruptcy process right way. If your circumstances improve in the near future, then you may be in a better position to pay down your debts.
Make It A Habit To Monitor Your Credit
Whether you opt for bankruptcy, debt consolidation or any other of the above options, it’s important to keep track of your credit score during the process.
With Experian’s free credit monitoring service, you’ll get free access to your FICO® Score powered by Experian data. You’ll also be able to view your Experian credit report, which is updated every 30 days. Other features include real-time alerts when changes are made to your credit report, including hard inquiries, new accounts and changes to your personal information.
As you stay on top of your credit, you’ll be able to spot potential issues quickly and address them before they damage your credit score too much. You’ll also be able to keep track of what your creditors are reporting to the credit bureaus and make sure it’s accurate.
As you come out the other side of your debt repayment plan, maintaining the habit of checking your credit regularly and developing good credit habits can help you achieve your goals of rebuilding your credit history more quickly.
Read Also: Do It Yourself Bankruptcy Chapter 7 Software
When Creditors Can Challenge The Discharge Of Your Credit Card Debt
While the discharge process is usually the same for most people, there are some exceptions. If a person ends up with credit card debt because he or she engaged in fraudulent activities, the debt cannot be discharged. However, the creditor must challenge the debt discharge process. If the creditor is successful, the court will make the individual pay the credit card debt. Common Examples of Credit Card Fraud:
- Making a false statement on a credit card application.
- Charging over $650 with any creditor for luxury services or goods within 90 days before filing for bankruptcy. In this situation, its presumed that your intent was fraudulent.
- Getting a cash advance that totaled more than $925 within 70 days of filing for bankruptcy.
Although its quite rare, some creditors take security interest in property. This information is usually disclosed in the agreement. In this situation, the credit card debt is actually secured.
Is Bankruptcy My Best Option6 Times When Declaring Bankruptcy In Canada May Not Be Right For You
When youre in financial difficulty, may sound like the only way out, but there are times when filing bankruptcy in Canada isnt your best course of action. There are quite a few things to take into account before forging ahead with such a big decision, and if you dont consider your options or think about how bankruptcy could affect other areas of your life, you could find yourself in a bigger predicament than where you started off.
Essentially, bankruptcy is a legal process that provides debt relief to consumers who are unable to repay what they owe to their creditors. Its intended to help honest people who find themselves in unfortunate circumstances.
Regardless of your situation, the bankruptcy process has long-term implications that can affect your credit and your personal life, and its something that should always be turned to as a last resort.
If youve been asking yourself is bankruptcy my best option? set aside some time to take a good look at your financial situation, and if any of these points apply, filing bankruptcy may not be right for you.
Also Check: Chapter 13 And Apartment Lease
How Long After Bankruptcy Can I Get A Credit Card
Although its negative impact gradually lessens over time, a bankruptcy will stay on your credit report for seven to 10 years. This means your options will be limited for some time. Exactly how long you’ll need to wait will depend on the type of bankruptcy you file: Chapter 7 or Chapter 13.
|Type of bankruptcy|
|After about three months|
|Chapter 13||It may take three to five years to discharge the bankruptcy. You should consult your attorney and the lender to see if you can apply for a credit card before then.|
- Chapter 7 bankruptcy, also known as a liquidation of assets, sells off eligible assets to cover as much of your outstanding debt as possible. The bankruptcy and debts associated with Chapter 7 are typically discharged within three months but remain on your credit report for 10 years from the filing date.
- In a Chapter 13 bankruptcy, also known as an adjustment-of-debt plan, the debtor makes partial payments to creditors as part of a three- to five-year repayment plan. The bankruptcy is discharged after the completion of the plan. A Chapter 13 remains on your credit report for seven years from the filing date.
Can You Keep Some Credit Cards If You Declare Bankruptcy
Unpaid medical bills and being out of work for an extended period are the leading reasons why someone may file for bankruptcy. Most people use bankruptcy as a last resort when the burden of debt becomes overwhelming. Bankruptcy essentially freezes your credit file, meaning you can’t apply for any new credit while your case is pending.
If you used your to stay afloat, its almost impossible to get a handle on that debt without some help. Learn whether you can keep some credit cards if you declare bankruptcy.
Don’t Miss: How To File Bankruptcy In Iowa
How Soon After Bankruptcy Can I Get A Credit Card
Being discharged from bankruptcy generally marks the end of your bankruptcy procedure. However, your bankruptcy stays on your credit record for six or seven years from the date of your discharge . This will affect your ability to get loans and other kinds of credit in the future.
However, once you are discharged you can apply for a credit card immediately. Whether you will be given a credit card, and the type of card is dependent on the financial institutions policies. Generally, it will take one to two years before you can get an unsecured credit card. In the meantime, there are other options.