Credit Card Bankruptcy
Deciding to file for bankruptcy is a very big decision, and depending on your financial situation, it can either be a life-saver or it can severely limit all of your future opportunities. Like we’ve said -- it’s a big
decision, and it’s important to make sure that it’s the right decision for you.
Filing for Credit Card Bankruptcy: The Process
Before you can file for bankruptcy, you’ll have to go through six months of credit counseling. This serves as proof that you have been aware of your debts and that you’ve tried to find other options. You’ll have a financial adviser who will look at your spending habits, your debts, and your income; the hope is that this adviser will be able to help you create a budget plan, and perhaps even work with your creditors, in order to avoid filing for bankruptcy.
If the adviser decides that bankruptcy is
the best option for you, you’ll have a long process ahead of you. Federal law requires that you enroll in financial management courses (even after declaring that you’re bankrupt), and there will be huge amounts of paperwork to fill out and fees to pay. It might sound ridiculous, but it’s actually possible to not have enough money to file for bankruptcy. These fees have been put in place to deter people from filing if there are other options available, but they certainly make the process even more difficult for debtors who really don’t
have any other options.
The Bankruptcy Abuse Prevention and Consumer Protection Act was passed in 2005, and it still requires that debtors seeking to file bankruptcy be thoroughly investigated before being allowed to do so. Before the law was passed, many people were taking advantage of bankruptcy because it allows all (or most) of your debts to be forgiven, i.e., wiped out entirely so that you’re no longer held accountable for paying them. It seems like a good solution for someone who honestly can’t
pay all of their debts, but many other people have viewed it as a way to shake off responsibility for their financial decisions. The obvious problem here is that all of these unpaid debts are left hanging, and quite a few people will suffer from one person’s unpaid debts.
The Bankruptcy Abuse Act wasn’t introduced to make life even harder for someone who is honestly struggling with their finances. Instead, it provides a set of guidelines and regulations which make lenders more flexible and which provide debtors with more options to try out before resorting to bankruptcy. For example, it required lenders to begin raising their minimum monthly payments so that more of the original balance owed would be included in the bill (rather than a bill entirely composed of interest rate fees). It also encouraged lenders to offer lower interest rates, and to be more willing to work with debtors on lower settlements if they have trouble making payments.
We know that we’ve said it before -- too many times, maybe, but it’s worth saying again: deciding to file for bankruptcy is a big decision, and it isn’t something that should be taken lightly. Sure, there are federal regulations in place that require
you to look for other options and to think about the decision you’re making, but these regulations are just the beginning. It’s important to talk with a professional financial consultant to make sure that bankruptcy is the right choice for you, and it’s important to remember that there are so
many other options available, even if you aren’t aware of them right now.
We know how stressful credit card debts and loans can be, and we know how hopeless it can start to seem. But the important thing is that you don’t give up yet -- there are plenty of resources available, and plenty of people who honestly want to help you reach financial independence again.