Can you file bankruptcy just on credit cards?

When financial hardships strike, it can feel overwhelming and leave individuals drowning in debt. If you find yourself in this situation with an overwhelming amount of credit card debt, you may wonder if filing for bankruptcy is a viable option. Bankruptcy is a legal process that provides relief for individuals struggling with debt, but can you file bankruptcy specifically for credit card debt? Let’s delve into this question and explore what bankruptcy entails, how it can affect your credit card debt, and answer some related frequently asked questions.

Understanding Bankruptcy

Bankruptcy is a legal process that allows individuals or businesses to eliminate or restructure their debts under the protection of the court. It provides a fresh start by discharging certain debts or creating a repayment plan. Bankruptcy laws differ between countries, but in the United States, there are two common types of bankruptcy for individuals: Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, involves the liquidation of assets to pay off debts. A trustee is appointed to oversee the process, and non-exempt assets are sold to satisfy creditors. Debts not covered by the liquidation process are typically discharged or forgiven.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, on the other hand, enables individuals to reorganize their debts and establish a repayment plan spanning three to five years. This allows debtors to repay a portion or all of their debts in a more manageable way.

Can you file bankruptcy just on credit cards?

Yes, you can file bankruptcy specifically for credit card debt. Both Chapter 7 and Chapter 13 bankruptcies cover credit card debt along with other unsecured debts such as medical bills, personal loans, and more. While bankruptcy may discharge your credit card debt, it’s important to note that it can have long-lasting consequences on your credit score and financial future.

Frequently Asked Questions

1. How does bankruptcy affect my credit score?

Bankruptcy has a significant impact on your credit score and will likely lower it. The exact decrease will depend on your previous credit history and the type of bankruptcy filed.

2. Can I keep any of my credit cards if I file for bankruptcy?

Generally, credit cards are closed during the bankruptcy process. However, some secured credit cards may allow you to keep them if you continue making payments.

3. Will I be completely debt-free after filing for bankruptcy?

While bankruptcy can discharge many of your debts, certain obligations, such as student loans, child support, and tax debts, may not be discharged.

4. Will I lose my personal assets in bankruptcy?

In Chapter 7 bankruptcy, non-exempt assets may be sold to repay creditors. However, exemptions vary by jurisdiction, and many people can protect most, if not all, of their assets.

5. Can I file bankruptcy if I have already been sued by a credit card company?

Yes, you can file for bankruptcy even if you’ve been sued by a credit card company. Filing for bankruptcy will temporarily halt the lawsuit as it falls under an automatic stay.

6. Can I discharge credit card debt incurred shortly before bankruptcy?

Credit card debt incurred immediately before filing for bankruptcy may be subject to scrutiny by the court, especially if it appears fraudulent. It’s crucial to consult with a bankruptcy attorney for guidance.

7. How long does bankruptcy stay on my credit report?

A Chapter 7 bankruptcy will typically remain on your credit report for ten years, while a Chapter 13 bankruptcy will stay on for seven years.

8. Can I apply for credit cards after bankruptcy?

Yes, you can apply for credit cards after bankruptcy; however, your options may be limited, and interest rates may be higher. Secured credit cards or those specifically designed for post-bankruptcy individuals may be a good starting point.

9. How soon after bankruptcy can I get a mortgage?

It is possible to secure a mortgage after bankruptcy. The waiting period may vary depending on the type of bankruptcy filed, with Chapter 7 typically requiring a longer wait than Chapter 13.

10. Can bankruptcy stop foreclosure?

Yes, filing for bankruptcy triggers an automatic stay, which temporarily halts foreclosure proceedings. However, it’s essential to consult with an attorney to understand the specific regulations in your jurisdiction.

11. Is bankruptcy the only solution for credit card debt?

Bankruptcy should be considered as a last resort. Before filing, explore other debt management options such as negotiation, debt consolidation, or credit counseling.

12. Do I need an attorney to file for bankruptcy?

While it is possible to file for bankruptcy without an attorney, due to the complex nature of the process, seeking legal advice from an experienced bankruptcy attorney is highly recommended to navigate the legal requirements effectively.

In conclusion, if credit card debt has become an insurmountable burden, filing for bankruptcy can provide relief. Both Chapter 7 and Chapter 13 bankruptcies cover credit card debt, but it’s crucial to understand the consequences and consider alternatives before proceeding. Consulting with a bankruptcy attorney will ensure you make an informed decision tailored to your specific financial situation.

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