Although filing bankruptcy has become more socially acceptable, filing bankruptcy does have serious ramifications which can impact a debtor for up to ten years. Recently on our bankruptcy forum a user asked, “If I have only one credit card with a balance on it is bankruptcy right for me?”
Filing bankruptcy can stop harassing creditor calls, stop home foreclosures, stop repossessions and may help you get a fresh financial start. It is not, however, the best decision for everyone. If you have one credit card whether or not bankruptcy is a good option could depend on the balance on your credit card.
For instance, filing Chapter 7 bankruptcy may allow you to discharge credit card debts, but the filing will also remain on your credit report for 7 to 10 year, making it difficult to get certain types of credit. It also can hurt your chances for employment, make it more difficult to rent an apartment, and increase the costs of getting a loan to purchase a car.
So, for example, if your credit card debt on your one card is $30,000 and you do not believe you can ever repay the debt, filing bankruptcy may be a viable option. Given the negative ramifications outlined above, however, if your debt is $5,000 or less it could make more financial sense to simply repay the debt and avoid bankruptcy.
Why would I not be able to file Chapter 7 Bankruptcy?
Changes to bankruptcy laws passed in 2007 made it more difficult for many debtors to file Chapter 7 bankruptcy. For instance, if your median income is higher than your state’s median income level or the court determines your disposable income is too high, you may be forced to repay a portion of your debts through Chapter 13 bankruptcy.
So in some cases, even if you have only one credit card, you may not be able to simply discharge your credit card debts through Chapter 7 bankruptcy. You may instead have to file Chapter 13 bankruptcy and create a debt repayment plan to repay a portion of the credit card debt.
The costs to file bankruptcy, especially if you have to hire a lawyer, should also be a consideration. For instance, if you only have $5,000 in unsecured debts but have to pay up to $1,500 to file bankruptcy and hire a lawyer, it might make sense to simply repay your debts.
What are my other options to filing bankruptcy with one credit card?
Most debtors with debts under $10,000 may be able to eliminate their debts by taking some simple steps:
- Eliminate all use of credit cards and move to a cash only system.
- Eliminate all discretionary spending including coffee, gym memberships, and cable.
- Increase your cash inflow by seeking additional opportunities to earn money.
- Create a budget and track every dime you spend.
Take these simple steps, use the extra money you spend to pay down your credit card balance, and avoid bankruptcy.
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