How to declare bankruptcy on credit cards

How to declare bankruptcy on credit cards

Falling behind on credit card debt can leave you feeling overwhelmed and trapped. Large credit card debt causes a domino effect of cascading problems. First, if your credit cards are maxed out, then just making minimum payments can mean lots of money, which leaves less for day-to-day living expenses. You can also incur late fees and over-the-limit fees, which cause the total amount you owe to keep climbing. If you fall far enough behind, your debt can go into collections, and you face constant harassing phone calls from collections agencies. Finally, overdue debt can be hard on your credit score, causing it to tumble.

If you face overwhelming debt, it may be time to declare bankruptcy on credit cards.  A skilled   bankruptcy lawyer can review your situation and explain your options.  Whether you qualify for Chapter 7 or pursue Chapter 13, there is light at the end of the tunnel.  You can make a fresh start.  Typically credit card debt is discharged in a Chapter 7 bankruptcy, and all or a significant portion may be discharged through Chapter 13.

How to file bankruptcy on credit cards jointly

The first thing to remember is that a “joint user” and an “authorized user” are not the same thing when it comes to credit cards.  This is a very important difference when it comes to filing bankruptcy in Missouri.  Here’s why …

Filing bankruptcy on jointly held credit cards

Filing bankruptcy jointly simply means that you and your spouse are both filing bankruptcy – as a married couple.  That way, it is likely that all your jointly held credit card debt can be discharged.  There are pros and cons to doing this, and a skilled Missouri bankruptcy attorney can help you explore your options and choose the right path that is best for your unique situation.  Of course, you can also file bankruptcy without your spouse if that turns out to be the most financially advantageous path forward.

Tips for filing bankruptcy on credit cards

Here are some important tips for filing bankruptcy on credit cards:

  • Don’t make any major purchases on your credit cards in the 60-120 days before you file bankruptcy. The court frowns on any filer who runs up significant debt buying large-ticket items shortly before filing, in hopes of having this debt discharged along with all their other debt.  If a judge believes you intentionally ran up debt to scam the system, the judge may reinstate this debt and you will still owe it after the bankruptcy is over.
  • Be sure to list every single debt you have on your bankruptcy filing – including every credit card, with account numbers. If you forget and leave one credit card off the list, you will likely still owe this debt even after filing bankruptcy.  Thoroughness is key.
  • Destroy all plastic credit cards after your bankruptcy is complete. You don’t want to misplace the physical cards, even if the accounts are defunct.  To get a fresh start, cut up the cards and dispose of them.

Different types of bankruptcy

There are two types of bankruptcy that you can file as an individual or couple. Chapter 7, also known as “fresh start” bankruptcy, is the most common bankruptcy. Chapter 13, also known as “wage earner” or “debt reorganization” bankruptcy, may be the right option if you earn too much to qualify for Chapter 7.

Chapter 7 Bankruptcy

This is a personal liquidation of your assets to pay off your debts.  Any remaining debt is usually discharged under Chapter 7.  Many or all of your assets – such as your house and vehicles – do not have to be liquidated.  Many Chapter 7 bankruptcy filings are “no assets” cases, where none of the assets have to be sold to pay your debts.

Chapter 7 is usually more advantageous for the filer, though not everyone qualifies.  There are certain income requirements, using the “bankruptcy means test,” for someone to qualify for Chapter 7.  One calculation determines whether your income is below the state median for your household size.  This calculation must be made before filing.  If you do not qualify for Chapter 7 then you will likely want to pursue Chapter 13.

Chapter 13 Bankruptcy

This is a personal reorganization of debt that spreads repayment out over a 3- to 5-year period.  Sometimes simply restructuring debt into more favorable terms provides enough relief for a bankruptcy filer to move forward successfully.  In a Chapter 13, you must have an adequate and sustainable income.  Some of your future earnings will be paid toward your current debts.  Some or all of your unsecured debts are typically discharged, but the amount of debt discharged without payment depends on the amount of your current income and debts.

One advantage of Chapter 13 is that you can keep your home, even if it is in foreclosure or you are behind on your payments.  You can stop foreclosure proceedings under Chapter 13 and work out a longer mortgage repayment plan than the current mortgage holder would typically allow.

Contact Birk Law Firm today

If you’re overwhelmed by debt, filing bankruptcy on credit cards may be an attractive option. At Birk Law Firm, we’ve helped hundreds of clients walk through the process and make a fresh start. To find out more about how we can help, call us for a free initial consultation at 573-332-8585.