Credit Card Bankruptcy

Should You File For Credit Card Bankruptcy

Before deciding whether you are going to file for credit card bankruptcy you need to decide if you are in a situation that warrants filing, or if there is even enough of a benefit to weather the damage that will be done to your credit score. I once had a client that declared bankruptcy to wipe out three thousand dollars in credit card debt, the house was paid off, no other debt, but she paid twelve hundred dollars to a lawyer to destroy her credit rating to get out from under three grand. Make sure if you are going to take such a drastic step that it will result in enough of an upside to justify the consequences.

Options to Consider Before Filing For Credit Card Bankruptcy

There are other options to consider before declaring bankruptcy, in most situations it should be the option of last resort. We have outlined some of these below, and then we have outlined some steps you can take after before, during, and after filing to mitigate the damage.

Credit Card Bankruptcy Counseling

If you are having trouble making your monthly payments on your credit cards you can try using a credit card counseling service. For a small monthly fee they make agreements with credit card companies to lower your interest and payments into a more manageable chunk so you can continue to service your debt. One thing you need to keep in mind is most of these companies are paid by credit card companies and some of your cards may not be included or get enough of a reduction to really help you with your payments.

Settling Your Debts

Another option before filing for credit card bankruptcy is to call your credit card companies and try to negotiate for lower payments or for balance forgiveness. Some companies would rather forgive your debt or let you pay a lower payment than risk you defaulting or declaring bankruptcy. One thing to keep in mind is that this will affect your credit score, they report it and it could lower your score considerably. So if you want to work towards eliminating credit card debt pick up that phone and see what the company says.

Tips Before, During, And After Filing for Credit Card Bankruptcy

Before you file make sure that all of the debts you want are included in the bankruptcy filing. I have seen people go all through the whole process only to remember one more card they forgot to include. During the process make sure your lawyer knows how to challenge adversary proceedings. An adverse proceeding is a tactic where the credit card company asserts that through either your application or some other type of fraud you never intended to pay on the card and that it shouldn’t be included in your discharged debts. After the credit card bankruptcy process is done make sure you take steps to reestablish your credit so you can begin to raise your score as soon as possible.

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