Is Chapter 13 the Best Way to Get Rid of Credit Card Debt?

Everyone has at least one credit card these days, if not a few. That means that most of us have credit card debt. While some amount of credit card debt is probably healthy, it can become overwhelming to the point that you have no choice but to take drastic measures in order to get free of it. Although there are a number of ways you can work credit card debt down, if you have a lot of it, a chapter 13 bankruptcy may become the only real solution you have.

Chapter 13 Bankruptcies

From time to time, some people have used chapter 7 bankruptcies to erase their credit card debt, but this is far from ideal. Normally, experts recommend a chapter 13 bankruptcy if something like credit card debt is the major concern.

With a chapter 13, you’ll file schedules with the court that include all the relevant financial information about your life. This will outline your credit card debt, but it will also list things like other debts you have, your income, expenses, property you own and more. You’ll also have to submit a plan which will show how you will go about paying off the secured debt you’re currently struggling with. Your secured creditors and the court will have to approve of this plan before your bankruptcy is approved. Usually, these plans take between three and five years to pay off.

Unsecured vs. Secured Debt

As we just mentioned when proceeding with a chapter 13 plan, one thing that will come up is your debt. Specifically, your secured and unsecured debt will need to be examined. Secured debt is the kind you have property to back up. Your mortgage and auto loans are examples of secured debt; if you don’t pay it off, your creditors can repossess the property in an attempt to recoup some of their losses.

Credit card debt is a great example of the unsecured kind. Student loans and personal lines of credit are too. Essentially, the “lender” believed you had sufficient financing to pay them back and therefore never bothered with securing collateral.

In a chapter 13 bankruptcy, most if not all unsecured debt gets wiped away. The courts focus on your secured debts and they look at how much you can realistically pay back given the amount of disposable income you have and are expected to have in the future (this is where your schedules come in handy). While you may have to pay back a small percentage of your credit card debt, any that is left over at the end of your repayment period is going to be discharged.

Getting Help with a Chapter 13 Bankruptcy

You never want to file bankruptcy without first speaking to an expert in the field, preferably a lawyer. In the case of using this process to alleviate credit card debt, you want to make sure you don’t make any mistake that could leave you vulnerable, despite having a bankruptcy on your record.

If the credit card companies can prove you made a fraudulent statement on your credit card application, that you spent over $650 with any credit card on luxury items or services within 90 days of filing bankruptcy or that you received a cash advance of over $925 within 70 days of your filing, they’ll be able to motion for full repayment. Of course, if they’re successful, your other credit card creditors will be too.

Let the professionals at Tyler, Bartl & Ramsdell, P.L.C. assist you with this decision and the process of declaring bankruptcy to ensure that your credit card debts are wiped as clean as possible. Call (703) 549-5000 or complete our confidential contact form today and we’ll get back to you ASAP.