Feeling overwhelmed with credit card debt is more common than you think. Approximately 35 percent of Americans carry credit card debt from month to month, according to a January 2023 Bankrate survey of 2,458 U.S. adults. If you are struggling to make your credit card payments and/or are unsure of how to pay off your debt, then it might be the right time to speak with an attorney. An experienced attorney can help you determine what options you have to deal with your credit card debt. If you are struggling, there you should look at options to help with your credit card debt.
Credit cards are one of the primary driving forces behind bankruptcy. Whether you’ve incurred debt due to increased spending or you’ve had to utilize credit cards due to financial challenges (like divorce, unemployment, illness, etc.), the rising minimum payments, high interest, and lack of flexibility in payment options can make it difficult to pay off credit card balances — especially if there are any other financial issues you are experiencing. It is important that you review your financial situations to see if you have alternative options to deal with the debts. These options often depend on what is going on your financial situation overall.
What a Credit Card Debt Lawyer Can Help Review
Often when someone needs credit card debt help, bankruptcy and debt settlement can be good options to consider. Bankruptcy can be an option to resolve credit card debt, but should only be considered after looking at your full situation. Debt settlement often comes with lower balances, but can result in low credit score, tax liabilities and expensive fees. It is important to review your entire situation to determine what option makes sense given your financial situation. It also is important to understand any pros and cons to using any process to get credit card debt help; any time you are dealing with changing payment terms, even things such as changing a due date or using 0% financing, it is imperative that you understand all the elements of the process. Speaking to an experienced credit card debt lawyer can help you review your options and see what makes the most sense for you.
How Much Do You Owe?
The first thing to consider is how much you owe in credit card debt (and all other unsecured debt). We often do not recommend considering bankruptcy unless you have at least $10,000.00 in dischargable debt. This number is often higher, if you have large assets or higher income. While there is no legal requirement that you have a minimum amount of debt, the cost-benefit analysis for debt levels under $10,000.00 often shows that there are better options to deal with the debt (i.e., settlements, payment plans, etc.).
Now, the $10,000.00 debt level is a general guideline; there are exceptions. If you have less than $10,000.00, but are being garnished or facing other legal action, it may make sense to file for bankruptcy. Additionally, it may make sense to look at all chapters of bankruptcy, including Chapter 7 and Chapter 13, to deal with the debts. However, it is important to review the situation fully with a bankruptcy lawyer before you make the decision.
Similarly, it is often important to review how your debt payments fit into your budget. If you are not able to afford your minimums each month (or can barely make them), then bankruptcy often becomes the recommended option. If you can afford the minimums, then the next questions is about how long it would take to pay off your debt. The longer it would take for you to be debt free, the more likely bankruptcy should be a good option to consider.
How Far Behind Are You on Payments?
Another important fact to consider is the status of the debt payments. If you have missed one or two payments, but you have the financial means to get caught up, it might be recommended. If you have missed a payment and do not believe you will be able to get caught up, then it is likely other options, like bankruptcy, should be considered. Similarly, if you are over 90 days behind on a debt, or it has been charged off, then it is likely you need to consider alternative ways to deal with the debt.
Another fact to consider is whether you will be paying more in interest and late fees. If you miss your payment, but are not yet 30 days behind, your credit card company will not report to the credit bureaus, but they will likely charge a late fee (which increases what you have to pay each month). Additionally, if you tend to miss payments, but never get more than 30 to 60 days behind, there’s a chance the credit card company will raise your interest rate and apply late fees and other penalties. These can add up and lead to much worse problems, but you still have a chance to get back on track.
Similarly, if you are late with payments, it is also possible the creditor may lower your credit limit and/or close your account. Both of these activities can hurt your financial situation; a lower credit limit/closed account can often hurt your credit score and result in your inability to use the account, if you have been using the account each monthly while also trying to pay it off.
Once things progress beyond an occasional late payment, the credit card company might turn your account over to a debt collector/collections department. These are people who focus entirely on collecting payments and they tend to be very aggressive. When debt is in collections it can be a decent opportunity to try to settle the account, but it also may start the clock on when you might be able to expect to see a lawsuit related to the debt.
Creditor Collection Activity
There are legal limits as to what a creditor can do to collect on the debt. It is common (and legal) for creditors to call, email, and mail you collection notices. Additionally, creditors can report you as they’ll take legal action and file a lawsuit asking the court for a judgment against you that allows them to be even more aggressive.
It’s usually at this point that people decide to check into bankruptcy. If the lawsuit is successful, it could result in wage garnishment or bank levies. Too often the only way to stop a wage or bank garnishment is filing for bankruptcy.
If you’re hoping to avoid bankruptcy, it’s important to act before a creditor or debt collector files a lawsuit. Options you have for dealing with credit card debt before creditors receive a judgment include:
- Creating a new payment arrangement
- Consolidating debts through a personal loan or debt consolidation loan
- Asking family members or friends for payment assistance
- Using money from personal or retirement savings to pay the debts
- Settling the debts for a less amount with a lump sum payment
Whether or not any of these is a better option than filing for bankruptcy varies from person to person. If you are worried about how to deal with your credit card debt, it is important that you speak to an experienced attorney about your options. A good credit card debt lawyer can help you weigh the pros and cons of every option and determine what makes the most sense for your financial situation.
You Can Eliminate Credit Card Debt by Filing for Bankruptcy
Credit card debts are unsecured. This means they usually qualify for discharge when you file for Chapter 7 bankruptcy. Discharge means that once your case is complete, you’ll no longer be legally obligated to pay the debts. The bankruptcy court liquidates your assets if you have any. Then it repays your creditors using those funds. Once they complete that process your case is closed. You no longer owe the credit card company any money.
There are a few exceptions under which you’d still be required to pay credit card debts after filing for Chapter 7 bankruptcy. Creditors can file an objection which is an adversary proceeding. If granted, you’re still obligated to pay the debt. This is rare and an experienced credit card debt lawyer/bankruptcy attorney can help advise you about the process and ways to prevent having issues during your case.
Looking for a Virginia Credit Card Debt Attorney or just looking for credit card debt help? The experienced legal team at Ashley F. Morgan Law, PC helps hundred of people every year with their debt related issues. Offering free consultations, our attorneys can help determine what options are available to you. Your options often depend on numerous factors, including debt amount, income, type of debt, assets, family size, and much more. Our attorneys have helped clients discharge millions of dollars worth of credit card deb over the yearst. We offer free consultations to review your situation.