When Should You Stop Paying Credit Cards and File Bankruptcy?
If you are unable to make your credit card payments, bankruptcy may be a possibility.
Bankruptcy is a serious choice that should not be taken carelessly. Paying off some debts, such as credit cards, becomes a waste of money after you’ve chosen to move ahead.
- If you can’t afford to pay back the debt
- If you’ve confirmed that you qualify for bankruptcy, it’s time to cease making payments.
- If you’re sure you want to file for bankruptcy, and
- whether a bankruptcy lawyer has permitted you to do so.
Not paying your credit card payments unless you’ve done all of the above may place you in a worse financial situation. Find out more about these and other factors.
Continue to pay your credit cards When Bankruptcy Isn’t Necessary
When considering bankruptcy, the first thing to consider is whether you can afford to pay off your credit cards. Why? Because you won’t be able to file for Chapter 7 bankruptcy if you earn enough money.
Filers with substantial discretionary income are required by the court to pay part or all of their credit card debt via a Chapter 13 repayment plan. A bankruptcy will also stay on your credit record for seven to 10 years. As a result, it’s important to think about all of your choices first.
Don’t stop paying your credit cards until you’re sure you want to file a bankruptcy
How can you know whether filing for bankruptcy is a smart idea? Here are a few hints.
Do You Feel Like You’re Being Sued or Harassed?
If you don’t make your credit card payments, you’ll likely get a lot of calls from the credit card company or its representatives. The calls will get more frequent and harassing as you become more delinquent. The continuous harassment from debt collectors drives the majority of individuals to seek bankruptcy relief.
The credit card company (or a debt collection agency) may decide to file a lawsuit to recover its debt, depending on your assets and the amount of debt you owe.
If the credit card company gets a money judgment against you, it may garnish your income or seize your assets to pay off the obligation. If you’re facing a lawsuit or your credit card company won’t deal with you, it’s time to consider filing for bankruptcy.
How Much Real Estate Do You Have?
A debtor may use bankruptcy exemptions to preserve or “exempt” property in Chapter 7 and Chapter 13 bankruptcy. Exemptions from bankruptcy vary by state. Depending on the bankruptcy chapter you file, what happens to “nonexempt” property that isn’t protected. As a result, you’ll want to check your state’s exemption rules and think about filing for bankruptcy.
This is how it goes.
The bankruptcy trustee will liquidate your nonexempt assets in Chapter 7 bankruptcy and utilise the proceeds to repay your creditors. Filing for Chapter 7 bankruptcy may not be in your best interests if you possess a lot of property that you can’t preserve with a bankruptcy exemption.
If you file for Chapter 13 bankruptcy, on the other hand, you will be able to retain all of your assets. However, you’ll have to pay an amount equivalent to the value of your nonexempt assets to your unsecured creditors (such as credit card companies).
You don’t have to pay it all at once, which is excellent news. Depending on the duration of your repayment plan, you’ll pay it over three to five years.
Don’t stop paying your credit cards until you’ve filed for bankruptcy
Making credit card payments is, in most instances, like pouring money down the toilet if you’re eligible to file for bankruptcy. Stopping your credit card payments may create needless harm if you’re still uncertain or won’t submit your case for a long time.
Also, before you cease making payments on your credit card debt, be sure you qualify for bankruptcy. Fees rapidly mount after you stop, and if you don’t file, it may be challenging to bring your accounts up to date.
So make sure you pass the Chapter 7 means exam, which is needed to be eligible for Chapter 7. Otherwise, you may have to file for Chapter 13 bankruptcy—and Chapter 13 eligibility isn’t guaranteed. For many filers, funding a Chapter 13 repayment plan is too expensive.
Consult a Bankruptcy Attorney
This essay just touches on a few of the topics you should think about before filing for bankruptcy.
If you plan to file for bankruptcy on your own, you must do thorough study and contemplation. In most instances, you’ll benefit from hiring a competent bankruptcy attorney.
If you’re concerned about not being able to afford an attorney, bear in mind that it’s usual to cease paying credit card payments and use the money to pay lawyers’ fees instead—as long as you’re confident you’ll be able to file.
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