Credit card debt can be one of the most disruptive things in a person’s life. Though it’s possible to carry credit card debt without any problems, many people are deep in debt with no end in sight. And unfortunately, the high interest on many credit cards makes the problem even worse.
If you feel as if you are always just dollars away from making ends meet and it is high-interest credit card debt preventing you from ever getting ahead, there is a solution. By reducing or eliminating the high-interest debt you have you’ll be able to save money for an emergency and put money toward other debts.
Most people don’t realize this, but bankruptcy is an option for those who have moderate income and high-interest credit cards, even if they are not in a dire financial situation.
Though a dire situation might be developing, many people are just able to keep their heads above water – but they are never able to get ahead and actually pay off any debt.
Bankruptcy can help.
Should I Negotiate or Refinance My Credit Card Debt?
Some people believe the best option is to negotiate with credit card companies to reduce their debt. This can help, but it’s only a short-term solution.
In the long run, you could end up paying more on a debt after you negotiate a settlement. Month to month you’ll have more money, but over the course of your lifetime, extending the terms of a loan will cost you a lot more.
Another consideration for any settlement is the tax consequence. It is possible that you can be taxed on the amount of money you saved as if it was income, which would now add a tax liability to your plate.
If you’re considering negotiating better terms on a loan, you should at least consider bankruptcy before making a commitment. It’s important to understand your options and know how bankruptcy could benefit your financial situation immediately and in the future.
Won’t I Lose Everything If I File for Bankruptcy?
Depending on the type of bankruptcy you file, you stand to lose any assets you have if you have in excess of the allowed exemptions. This is one of the reasons it’s so important to work with an experienced bankruptcy attorney who can help you protect your assets.
If your financial situation is strained, and you need to protect assets in excess of Chapter 7 limits, you can file for a Chapter 13 bankruptcy.
Chapter 13 helps you reorganize debt and forces creditors to accept the amount of money you can afford to pay them. It does not automatically or immediately eliminate debt, as is often the case with Chapter 7, but it does help you create a situation in which you can afford your debt.
It also allows you to pay zero interest on credit cards, which can save you a tremendous amount of money and help you pay down your debts faster.
Chapter 13 bankruptcy repayment plans last anywhere from 36 to 60 months. The plan is determined by your last several months’ income. At the end of the term, any remaining debt is discharged, which means you are no longer legally obligated to repay the debt.
The debt you eliminated through bankruptcy has the added advantage of carrying no tax consequence. Unlike when you negotiate a settlement and can be taxed on the cancelled debt, a bankruptcy discharge carries no tax liability on the eliminated debt.
Chapter 13 also allows you to keep your property, so you won’t lose your home or other assets.
To read more about how Chapter 7 and Chapter 13 differ, check out this article from Experian.
Are High-Interest Credit Cards Making It Difficult to Get By?
If you are struggling to keep up with credit card payments and feel as if you just get deeper and deeper into debt the more you pay, bankruptcy can help. Filing for Chapter 13 bankruptcy prevents you from throwing money at a problem that isn’t going to go away. It helps you get organized and back on track.
To learn more or to schedule a consultation to speak to someone about Chapter 13 bankruptcy and how it can help your high-interest debt, contact the law office of Frank J. LaPerch, PC at 845.942.5500.