Stack of credit cards

Taking Care of Credit Card Debt: Bankruptcy vs. Debt Negotiation

One of the most common types of debt that consumers have is tied to their credit card(s). In 2020, Americans owed more than $1 trillion in credit card debt alone, making it no secret that getting rid of that debt is a top priority. It is one of the easiest debts to rack up, and some of the most difficult to get rid of, but not impossible. Many people look over the benefits that bankruptcy has when it comes to getting rid of debt, and we are here to outline its advantages.

Bankruptcy and Credit Card Debt

The most common form of bankruptcy that can take care of credit card debt is Chapter 7. It is reserved for low-income consumers that do not qualify for any of chapter, primarily Chapter 13, and must pass the Chapter 7 Bankruptcy Means Test in order to file.

One of the biggest benefits of Chapter 7 bankruptcies, as well as all bankruptcies, is automatic stay. It is a protection granted to filers the moment their bankruptcy papers are filed that halts all creditor and lender actions against them for the duration of the bankruptcy process. This can be especially useful for credit card debt that requires immediate or fast-approaching payment. It grants the precious time needed to complete the bankruptcy process and gain a much-needed fresh start.

The biggest and most important benefit of bankruptcy is that debt can simply be wiped away. Once the bankruptcy is complete, filers that are granted a discharge that permanently eliminates their debt. With credit card debt being classified as dischargeable, filers have virtually no problem gaining a discharge for this type of debt.

Why Choose Bankruptcy Over Debt Negotiation

Debt negotiation is effectively sitting down with your creditor(s) or lender(s) and negotiating to pay a smaller sum of your debt instead of the full amount. Pursuing this course of action can take time, time that you simply may not have, while your debt only continues to grow. There is also no guarantee that your creditor or lender will even accept the offer to negotiate your debt.

Even if you are able to negotiate your debt, you are still required to pay money that you may not have. One indication of this is if you are forced to dip into your retirement savings, such as your 401(k) in order to pay the obligations. There are also tax issues that you may run into with the IRS if you are able to reach an agreement. In other words, you may not be solving your debt issue and only prolonging it.

Bankruptcy, on the other hand, is a process that most debtors only need to complete once, while you may need to attempt to negotiate with more than one creditor for different debts. Bankruptcy also has the ability to take the largest amount of debt, found in your credit card(s), and eliminate it permanently without having to pay back a dime. It is the route that your creditor does not want you to take, because they lose out on the ability to collect from you.

Contact Our Los Angeles Bankruptcy Team Today

Filing for bankruptcy may seem too simple of a solution, but that may not be a bad thing. When committed to the process, you are able to discharge your credit card debt without the hassle of dealing with creditors.

We can help make bankruptcy simple. With personalized and compassionate services, we are well-equipped to help you find the financial freedom you deserve.

Contact us today through our website or give us a call at (213) 344-0043 for a complimentary consultation to find out how we can help you!