Filing For Bankruptcy Stop Using Your Credit Cards
If you are among the millions of Americans struggling with debt that seems insurmountable, bankruptcy may be the best option for finding relief and a fresh financial head start. If you are considering bankruptcy, you should now that there are certain things you might want to avoid prior to filing under any Chapter of the bankruptcy code. This is especially true when certain action, such as using credit cards, may actually negate your eligibility for filing, or even subject you to criminal consequences.
For many people struggling with debt, using a credit card has been a means to get by. Unfortunately, incurring charges can only cause the cycle ofdebt to continue. At Allmand Law Firm, PLLC, we have worked with numerous men, women, families, and businesses throughout the Dallas Fort Worth area when they were dealing with tough times. We know the struggles our clients face, and we know that credit cards can be the lifeline they rely on when times get increasingly tough.
While using a credit card to pay down debts and obligations may not always have negative consequences, you must consider how it is being used and why you should try to limit or avoid using one altogether.
What Are My Options For Credit Card And Medical Debt
Bankruptcy is not something to be entered into lightly. The repercussions are lasting and can impact many future decisions you might want to make, and can even affect your employment prospects. However, there are times when its the right choice. At Sheppard Law Offices, well meet with you to make sure you receive personalized, custom advice. Before that though heres some information that could prove useful in your decision making in what can be a very stressful time.
Don’t Stop Paying Credit Cards Before Qualifying For Bankruptcy
In most cases, if you’re qualified to file for bankruptcy, making credit card payments is like throwing money down the drain. But if you’re still undecided or might not file your case for a long time, stopping your credit card payments can cause unnecessary damage.
Also, before you stop paying your credit card debt, you’ll want to be sure that you qualify for bankruptcy. Once you stop, fees add up quickly, and if you don’t file, it might be hard to bring your accounts current. So you’ll want to confirm that you pass the Chapter 7 means testthe test required to qualify for Chapter 7. Otherwise, you might have to file for Chapter 13and qualifying for Chapter 13 isn’t a given, either. Funding a Chapter 13 repayment plan can be too costly for many filers.
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Keep Your Credit Utilization Ratio Low
Another key credit score factor is your it accounts for 30% of your FICO Score. Your credit utilization ratio measures how much of your credit you use versus how much you have available. For example, if your available credit is $10,000 and you use $2,000, your credit ratio is 20% .
Although its often recommended that you keep your ratio below 30%, you may be able to rebuild your credit faster by keeping it closer to 0%.
Get Help Filing A Chapter 7 Case Without Paying An Attorney Fee
Although it can seem complicated, many people who file for Chapter 7 have a pretty straightforward cases. In these easier cases, it usually makes sense to file on your own but just get help with the paperwork.
Donât know where to start? A nonprofit like âUpsolveâ might be all you need. This free legal aid nonprofit can help you do your own paperwork and give you guidance on what to expect throughout the process.
Donât forget â Upsolve is free! The only costs you have to cover are the ones required by the court. Take their screener here to see if you qualify for their assistance!
Our unique bankruptcy software walks you through the process of filing a Chapter 7 case step-by-step. You can confidently complete your bankruptcy forms, file the forms with the bankruptcy court, and attend your bankruptcy hearing without an attorney.
In most cases, debtors receive their bankruptcy discharge within four to six months after filing their Chapter 7 bankruptcy petition.
You are required to pay the filing fee to the bankruptcy court and pay the fee for your bankruptcy courses. The filing fee is a standard fee, but you can typically locate a company that provides the bankruptcy courses online for $10 to $15 per course .
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Debt Settlement Credit Score Impact
Debt settlement will be on your credit report for seven years and definitely impact your ability to get a loan and the interest rate you pay, if you are approved.
Debt settlement typically requires that you make a lump-sum payment to clear your account. Its generally advised that you stop making monthly minimum payments until youve negotiated a settlement plan, as creditors will be more inclined to negotiate with you if theyre no longer receiving any payments on your debt. But stopping payment can further damage your and expose you to late fees, additional interest charges, collection efforts and lawsuits.
The possible advantage to settlement is that in exchange for a payment, creditors will sometimes agree to report the settlement as paid as agreed, which means your score wont get hit with negative points like it would if it were reported as just settled. Not all creditors report information to the three credit reporting bureaus so its possible, though not probable, that your settlement may not get reported.
If You Need Bankruptcy Protection Make It Count
There’s a limit on how often you can apply for bankruptcy, which is why Tadross recommends his clients think very carefully about it before going that route. The danger of jumping into a bankruptcy head-first right now is that you may end up incurring more debt over the next few months. If that happens, and you’ve already filed, then you won’t have a lot of options to wipe out your new debt.
If you file a Chapter 7 bankruptcy and receive a discharge of your debt, you can’t file again for eight years. If you file for Chapter 13, you’ll need to wait six years before you can file for a Chapter 7 bankruptcy. If you want to re-file for Chapter 13 bankruptcy again, the waiting period is two years.
It’s important to consider the timing. Will you see any benefit now? For example, if you’re about to lose your home or your car is going to be repossessed, then filing for a Chapter 13 and stopping the immediate foreclosure may help. Several states and cities have halted foreclosures and those with federally-backed mortgages are protected for now, but many homeowners who aren’t covered by these measures.
If you just lost your job or were furloughed because of the coronavirus, but expect to be rehired once business resumes, then it may be best to wait, says John Rao, an attorney and bankruptcy expert with the National Consumer Law Center.
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Can Bankruptcy Clear Credit Card Debt
October 13, 2014 |
When you find yourself in a mountain of debt, declaring bankruptcy may be your best, if not your only, course of action. We feel like it is extremely important to know how declaring bankruptcy will affect your debt and your future. Talking to an experienced bankruptcy attorney is something you need to do before you make the decision to declare bankruptcy. There are certain kinds of debt that can be discharged and other kinds that cannot.
The bankruptcy code does not list what is dischargeable and what is not, but it does list what debt is non-dischargeable. In general terms, the following are some of the debts that are most often dischargeable when a bankruptcy is filed:
- utility bills
- rent that hasn’t been paid
- debt in collections
- payday loans
- unsecured loans like credit cards
The kind of credit card debt that will not be discharged when filing a Chapter 7 bankruptcy is when you charge a vacation to your credit card and a month later file for bankruptcy, charge large-ticket items that you couldn’t possibly afford to pay back, go on shopping sprees that aren’t consistent with your spending prior to the spree, or any spending you do that may appear fraudulent.
What Is A Debt Collection Lawsuit
When you fail to pay your credit card debt, the company may file a debt collection lawsuit seeking payment. If you receive a lawsuit for credit card debt, you have a short time to file a response to the lawsuit.
If you ignore the credit card lawsuit, the company will file a motion asking the judge for a default judgment. The default judgment states that you owe the credit card debt. In most cases, the judge allows the credit card company to add attorney fees and other costs to the debt you owe.
The default judgment is recorded at the courthouse in the county in which you live. The judgment accrues interest until it is paid in full. In most states, the judgment also attaches to any real estate that you own, or you purchase after the judgment is entered. If you sell your property, you must pay the judgment in full from the proceeds of the sale.
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Filing Bankruptcy In Florida For Credit Card Debt
For many, bankruptcy is the best solution when credit card debt is out of control. You may be able to wipe out all the credit debt without even paying a portion of what is owed. However, bankruptcy is not right for everyone, you should consult with a bankruptcy lawyer in Tampa for advice about your specific case.
Talk To A Bankruptcy Lawyer
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When To Consider Debt Settlement Or Bankruptcy
If your monthly debt payments, excluding mortgage or rent, exceed 20% of your income, you have a debt problem that requires action. The seriousness of the problem, and your ability and determination to overcome it, will determine whether a debt settlement plan or bankruptcy is the better option.
Here are some scenarios in which debt settlement may provide the better path out of debt:
- Youre able and willing to negotiate with creditors or debt collectors on a settlement plan that you can afford and stick to.
- Your creditors will agree to greatly reduce your debt burden in exchange for your commitment to make a lump-sum payment.
- Your income is stable enough that you can continue to pay your mortgage or rent and other essential bills in addition to the payments required under a debt settlement, while still saving some money for emergency expenses.
Here are some scenarios in which bankruptcy is the better option:
Its important to remember that these are general guidelines, and anyone in serious debt who is weighing the pros and cons of debt settlement or bankruptcy is recommended to consult with a nonprofit credit counselor. Counselors from National Foundation for Credit Counseling – member agencies such as InCharge Debt Solutions can help you evaluate your current financial situation and the various debt relief options that may be available to you.
Lets Take A Look At A Few Of Those Mistakes:
Failing to fully understand the credit card terms. Many post-bankruptcy debtors are so excited to receive credit card offers after their bankruptcy that they end up skimming over the terms of the credit card. This can result in signing up for credit cards which are stuffed with many fees and high interest rates.Placing irresponsible authorized users on their credit card account. Many post-bankruptcy debtors make the mistake of trying to help out friends and family by placing them on their credit card accounts as authorized users only to be left with a large bill after those people fail to pay.
Co-signing credit card accounts or other loans for friends and family with credit issues. Post-bankruptcy debtors must remember that if they are not paying their own bills their friends and family members are even less likely to pay a bill which was co-signed.
Failing to communicate with creditors early and often when they run into financial problems. Post-bankruptcy debtors are not immune to financial issues after their bankruptcy discharge. But when those issues do come up, they must make sure they communicate clearly and early with creditors.
Failing to get any creditor agreements in writing. As we mentioned in point #4, sometimes there are financial issues which require us to work something out with creditors. But post-bankruptcy debtors need to make sure that they get all agreements in writing.
Filing Bankruptcy: The Cons
The first downside to filing for bankruptcy is that despite helping you out of debt, it will not eliminate all your debts. The following are some of the debts that will remain after filing for bankruptcy:
In addition, although you do get to keep your exempt property when filing for Chapter 7, you do lose your non-exempt property. Depending on your financial circumstances, this could include your house, cars, cash, stocks, and bonds.
Filing for bankruptcy also leaves a stain on your credit history for 10 years. It may be significantly more difficult to secure a loan in the future. Even if you do secure a loan or a credit card, you will more than likely have a significantly higher interest rate attached to it.
Finally, filing bankruptcy is not cheap. With filing fees, bankruptcy trustees fees, credit counseling fees, and attorney fees, the cost of bankruptcy can really add up.
If you have further questions about the pros and cons of filing bankruptcy, you should contact a knowledgeable bankruptcy attorney and set up a consultation.
What Bankruptcy Typically Looks Like
If you do end up filing for bankruptcy, there are generally two types that individuals file: Chapter 7 and Chapter 13.
A Chapter 7 bankruptcy is all about selling anything valuable you own a second vehicle, a vacation home, collectibles, stocks, bonds to pay off your debts. Generally, this type of bankruptcy wipes out all of your outstanding debts once a judge approves your filing in court. The whole process typically takes about three to five months. Chapter 7 bankruptcies are best suited for those who cannot pay back all, or a significant portion, of their balances. Tadross says that he typically recommends clients file for Chapter 7 bankruptcy if they have an unmanageable amount of unsecured debt, such as medical or credit card.
A Chapter 13 bankruptcy, referred to as a reorganization bankruptcy, is designed for those with a regular income to create a plan to repay all, or part, of their debts in installments. It works well if you are so far behind on your home mortgage payments that you may be facing foreclosure or eviction. With this type of bankruptcy, you generally don’t have to sell off your property to pay your lenders, but instead work to pay off your debts through a court-approved consolidated repayment plan that runs for a set period of time, typically three to five years. At the end of that period, any remaining unpaid debts are discharged.
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You Can’t Get Rid Of Credit Card Debt Incurred Due To Fraud
Sometimes the creditor can challenge the discharge of your credit card debt. If successful, the court will not discharge the debt, and you’ll remain responsible for paying for it after your case ends. Here are a few common situations:
- You made a false statement on your credit card application to deceive the creditor that was “material” to the credit card issuer’s decision to extend credit to you. For example, you grossly inflated your income.
- You charged more than $725 to any single creditor for luxury goods or services within 90 days of your bankruptcy filing. In this situation, the law presumes that your intent was fraudulent.
- You got a cash advance from a single creditor totaling more than $1,000 within 70 days of your bankruptcy filing.