For many people, credit cards are a big source of their personal debt. Americans' revolving credit card debt, meaning debt that carries over month to month, has risen to over $1 trillion. That is the highest it's been since 2008.
That doesn't necessarily mean that people are using their credit cards for endless shopping or other frivolous pursuits: many people use their credit cards for medical bills, necessary car or house repairs or to help make ends meet. If you find yourself overwhelmed by credit card debt, along with other financial commitments, you may be considering bankruptcy as a way out.
There are many misconceptions about bankruptcy. Below are three things you should know the truth about if you are considering Chapter 7 or Chapter 13 bankruptcy.
Myth 1: Bankruptcy can't get rid of consumer debt.
Filing for bankruptcy can eliminate numerous types of consumer debt, including credit card debt. However, it is not always fully wiped out. It depends on whether you file for Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy could wipe out all your credit card debt, but you must qualify for Chapter 7. Your eligibility for Chapter 7 debt relief is determined by taking the "means" test.
If you are not eligible for Chapter 7 - meaning you still have property or assets that disqualify you from Chapter 7 - then Chapter 13 bankruptcy may be the answer. Chapter 13 allows you to create a workable payment plan that lasts three to five years.
Myth 2: You will lose your house, car or other important possessions if you file for bankruptcy.
This is a persistent myth. While sometimes debt-laden consumers may have to turn over property to pay back creditors, that is not always the case. Each situation is different, and bankruptcy law provides for exemptions that allow people to keep things like homes, vehicles and other possessions. If keeping your house or car is a priority for you, your lawyer can help you figure out a plan that can help you do that.
Myth 3: Bankruptcy is an easy out.
While bankruptcy is a great tool for many, it is not a totally easy way out. There are restrictions around who can file for bankruptcy: if you have made too much money in the past year or if you have committed fraud, you may not be able to file. However, getting ahead of the situation and asking for help from a bankruptcy attorney before things get bad could save you a lot of time and money later.
Credit card debt doesn't have to be the end
If you are in deep credit card debt, you might feel like there's no way to get out of it. However, bankruptcy offers a fresh start by getting rid of part of or all your credit card debt and helping you move on.