Filing Bankruptcy For Credit Card Debt
- How To Do It.

Filing bankruptcy for credit card debt is allowed under chapter 7 and to some extent with chapter 13 bankruptcy act. See how you can do so below, as well as precautions you should take when filing bankruptcy for a credit card debt. You would be able to contribute your experience and comments here too.

Can I file bankruptcy for credit card debt only? This is a question that is commonly asked.

Financial miss-calculations or unforeseen events or conditions can befall anyone, leading to difficulty with repayment of credit card debt. The average household credit card debt continues to be on the rise.

Estimates have it that the average American household credit card debt is now between $3,600 to $9000 depending on how the debt is measured. 

Filing bankruptcy for credit card debt is a decision that many must make. 

If you find yourself in that situation, do not despair. While declaring bankruptcy is the very very last option anyone should take, if you have to, then you have to. 

Bankruptcy laws allow anyone who cannot honestly pay off debts they owe, "a new opportunity in life and a clear field for future effort unhampered by the pressures and discouragement of pre-existing debt".  It is literally designed to help give you a clean start again.

Though there are strict rules and regulations that governs the bankruptcy process, it truly protects those who genuinely do not have the means or ability to pay back what they owe, and this certainly includes your credit card debt.

Filing Bankruptcy For Credit Card Debt - The Considerations

Filing Bankruptcy For Credit Card DebtFiling bankruptcy for credit card debt should be the very last resort.

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 (usually within 3 to 5 years), all that they can truly pay back. After the specified time, whatever has 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 debts 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. So. Yes. You can file bankruptcy for credit card debt under chapter 7 or chapter 13 bankruptcy act if you are in the USA and certainly so in Canada and the UK as well as many other countries, as long as you meet some preconditions. 

Before you get your credit card debt written off under the bankruptcy laws 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. 

Filing Bankruptcy for Credit Card Debt Step By Step

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.

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 - Money 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 assets
  • 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. There are fees for this service and in some cases, you can add the fee to your repayment if you are filing chapter 13 bankruptcy for your credit card debts. 

Yes. Filing bankruptcy for your credit card debt is possible. Consider deeply though if this is the best solution for you and how it would affect you and your credit score as well as ability to borrow in the near future.

Doing it right, filing bankruptcy for credit card debt could the best decision and way out of unsecured debts, including credit card debts.