Filing Bankruptcy For Credit Card Debt - The Considerations
In 2005, President George W Bush signed into law a new bankruptcy law called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 - BAPCPA . This is new law is designed to make it harder for people who can truly repair their debt to take advantage of the system and declare bankruptcy.
It mainly allows for one of two routes to declare bankruptcy:
- The Chapter 13 Bankruptcy Act which basically allows debtors to be able to negotiate with their creditors on an approved restructured payment plan over a specified period of time all that they can truly pay back. After the specified time, whatever is not been paid off is written off completely.
- The Chapter 7 Bankruptcy Act which basically allows a debtor, after meeting a number of eligibility criteria, to be discharged of all qualifying debt they owe immediately after selling all their non exempt assets to pay off what they owe.
Many will not be able to file Chapter 7, but will need to file Chapter 13 instead. Chapter 13 requires that the debts not be discharged but simply restructured.
Credit card debts are seen as unsecured debts or claims and are allowed to be discharged or written off under any of the two types of bankruptcy routes.
Before you get your credit card debt written off under the bankruptcy lows though, you must be able to establish that:
- You have not used the card to make purchase of luxury goods in preceding three months before declaring bankruptcy and
- That you have not make cash withdrawal or cash advance on the card in the preceding two to three months before declaring bankruptcy.
In addition, consumer credit counseling is necessary. The new bankruptcy act requires all who are thinking of filing bankruptcy for credit card debt or indeed any type of debt to undergo compulsory consumer debt counseling and get help and advice on how they can pay off their debt or at least best manage it in the six months before they actually file for bankruptcy.
How To File Bankruptcy For Credit Card Debt
Filing bankruptcy for credit card debt should be the very last resort for you, no matter how much your debt is. With the right advise and step, you can get most of your debt written off without resorting to bankruptcy or indeed paid off.
Before going about how to file bankruptcy for credit card debt, we recommend that you read this book by Kenny Golde titled: Do-It-Yourself Bailout: How I Eliminated $222,000 of Credit Card Debt in Eighteen Months and Saved Nearly $150,000. You will learn valuable tips and practical ways to eliminate the most frightening credit card debts you could ever accumulate.
Another resource that can help you eliminate your credit card debt is an eBook by John Oswald that reveals a step-by-step procedure you can start implementing right away to help eliminate your credit card debt, including help with budgeting, contacting and negotiating your credit card and IRS debts, why you should and how to avoid bankruptcy, dealing with debt collectors, lawsuits, and credit repair by yourself. You can get this Complete Debt Relief Manual eBook online here.
If you are convinced that you have no option than to declare bankruptcy on your credit card debts, here is how to go about it:
- Sit down and list all your credit card debts from all your creditors and their names and amount from each of them
- Also add up all your other debts and see your total debt burden
- Now, list all your assets - Boney in the bank, shares and stocks if any, car value, jewelries, watches, expensive clothes, and equity in your house if you won one. Add up your total asset
- See if your total credit card debt is more than your total assets
- Approach a debt counselor to help assess your individual situation and advice you if bankruptcy would work for you. You can get help with contacting a debt counselor contacting ConsumerCredit.Com on +1 800-769-3571 if you live in the USA or the National Debtline over the Telephone on 0808 808 4000 if you live in the UK.
- Decide if you want to go the route of chapter 13 or chapter 7 bankruptcy. Your debt counselor will be able to guide you through this process
- You will then need to apply to the courts for bankruptcy.