All you Need to Know about Credit Card Bankruptcy

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The average person has more than five open credit card accounts. On the day that people turn eighteen, credit card companies begin inundating them with credit card offers. Many people fall into a trap early on because they do not understand that there are major consequences associated with racking up a lot of credit card debt.

How a Bankruptcy Impacts a Person’s Credit Score

The more that a person charges of their credit lines the worse their overall credit score will be. This is because a credit score depends on the following things: payment history, amount of debt, and amount of credit line used. Many people end up having to file for bankruptcy text due to their high credit card debts. This action will unfortunately ruin their credit score for about seven to ten years. It will be hard for the consumer to apply for new lines of credits which can make life much harder for them.

How to File for Bankruptcy

The first step in the bankruptcy filing process is to get together a list of credit card creditors, the outstanding balances, account numbers, and the addresses because they are asked for in the bankruptcy filing documents. Then, provide a list of personal assets such as bank accounts, stocks, cars, houses, boats, and other items. There is a filing fee that needs to be paid; most people will pay between 250 and 500 dollars to file for bankruptcy.

New Bankruptcy Laws Are In Effect

Most consumers think that they can just fill out their bankruptcy form, pay a filing fee and the court will just discharge their debts and they can go on their way like nothing really happened to them. This is not true anymore because bankruptcy laws have been changed due to there being so many filings each year.

Before a person files for bankruptcy, they must get six months of credit counseling sessions with a certified credit counselor. This is a new stipulation in bankruptcy reform laws that were enacted in 2005. They were aimed at trying to get consumers to not jump the gun and file for bankruptcy. Every time that credit card debt is discharged through the court system, tax payers have to absorb these costs. Credit card companies also have to absorb the debts that go unpaid and in turn raise interest and other fee rates for their card holders.
Credit counselors will assess the following things before advising someone to file for bankruptcy:

• Amount of debt owed.
• Household income of all parties involved.
• How long the credit card debts have gone unpaid.
• How many assets the individual has.
• If other debt solutions such as debt consolidation and settlements might be able to pull the consumer out of debt.

Credit Card Debts May Not Be Fully Discharged

Credit card companies can sue people for the credit card debts that they have accrued even though the person has filed for bankruptcy. Most credit card companies will only do this for large debts; those typically over five to ten thousand dollars. They will file a lawsuit with the court and legal papers will be sent to the consumer who owes the debt. In conclusion, filing for bankruptcy to get rid of credit card debts is a very big decision in a person’s life.

Some people abuse the fact that they can file for bankruptcy. It is important to weigh the pros and cons before filing the papers because you can only do it once every seven years so learning from the financial mistakes that were made before needs to be a priority.

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