Bankruptcy is an option for any financially challenged or low income individual overwhelmed with credit card debt. This does not mean every person in this situation is eligible for a debt discharge. It does mean a person can attempt to use this route if he or she is struggling financially. Certain requirements are necessary before the bankruptcy court will approve an individual for a Chapter 7 and Chapter 13.
Before you file bankruptcy, you should fully educate yourself on the difference between a Chapter 7 and a Chapter 13. In a nutshell, a Chapter 7 will wipe away all or most of your debt at the end of your bankruptcy. The trustee may liquidate any property or assets you have to pay off the amount you owe. In a Chapter 13, you are responsible for paying a portion of your debt regardless of your financial hardships. A Chapter 13 acts as a debt repayment program but it still affects your credit in a negative way.
Since it takes seven to 10 years to discharge a bankruptcy, you should only use this option as a last resort. Use every resource you have to pay off your credit card debt before you file bankruptcy. By doing so, you will still have a chance to maintain your credit score. Even if you need to make a few late payments, you will still come out better in the long run. You may have a few late payments on your credit report, but you have a chance to improve your credit if your financial situation gets better.
This opportunity will not exist if you file for bankruptcy. If your financial situation improves while you are waiting for your bankruptcy charge to vanish, it will not help you in any way. Lenders will continue to deny you even if you have a stable and secure income. The bankruptcy means more to them than your current financial situation. Obtaining credit for a house, a vehicle, and even another credit card will be difficult. Patiently waiting for your seven to 10 years to pass will be the only way for you to fully restore your credit.
People usually consider bankruptcy when their emotions get the best of them. Being in a desperate situation causes them to panic and think irrationally. Bankruptcy seems like the best solution at the time because it will ease the anxiety. However, it leaves the person in a worse situation for a longer time period. If you are dealing with credit card debt, do not let your emotions overwhelm you. Think about your situation rationally. Pay off your debt slowly even if you do it through a debt management service. This will keep your credit alive while you do what you can to reduce your debt.
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