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3 reasons Chapter 7 bankruptcy can help resolve credit card debt

On Behalf of | Apr 23, 2023 | Chapter 7 Bankruptcy

Credit card debt has a way of building up quickly with little warning. In some situations, individuals unexpectedly lose their jobs or have massive expenses that arise, forcing them to overextend themselves. Other times, people simply don’t have a balanced budget and slowly add to their balance month after month until they no longer have any available revolving credits.

In both scenarios, those who are struggling with high levels of credit card debt may find themselves trapped in the cycle of making minimum payments and incurring not just interest but fees on their accounts each month. Thankfully, bankruptcy is a viable solution for those struggling with unsecured debt, like high credit card balances.

1. There is no debt limit

In some kinds of bankruptcy, like Chapter 13 filings, there is technically a limit on how much debt an individual can discharge. Especially if someone is a successful professional, their total unsecured debts could easily be tens or even hundreds of thousands of dollars. The ability to potentially discharge all of those balances simultaneously makes Chapter 7 bankruptcy quite useful.

2. The automatic stay can prevent a judgment

Credit card lenders who haven’t received payments in a month or more may decide to initiate assertive collection activity. Collection efforts could include taking someone to court and seeking a judgment against them. That judgment could then result in a garnishment of someone’s wages. Filing for bankruptcy before a lawsuit goes to court can result in its dismissal thanks to the automatic stay. Although bankruptcy doesn’t always resolve existing wage garnishments, it can help prevent a creditor lawsuit and a judgment against the person who files.

3. The discharge can eliminate the amount due

Provided that someone qualifies for Chapter 7 bankruptcy and successfully completes the process, the courts will grant a discharge of all of their unsecured debts included in the filing, which will typically mean most, if not all of their credit card balances. They will no longer have an obligation to pay off those balances, which means that they will have less strain on their household budget.

When someone recognizes that the credit card debt is no longer under their control, they may benefit from considering all of their options for resolving their financial struggles. Filing for personal bankruptcy with the assistance of a legal professional is a viable solution for many people who are struggling with credit card debt.