By Naomi Smith -
Credit card bankruptcy can also be termed as consumer bankruptcy. With the current recession, many people may have felt the need to file, for this can be an effective tool to getting out of a financial mess. However, it can also have consequences, thus this should only be considered as a last resort.
There are two types that consumers can file, Chapter 7 and Chapter 13. However, Chapter 13 is usually reserved for consumers. Chapter 7 means that a trustee will take possessions of an individual’s assets to be distributed to creditors. This is only filed when a consumer have too many debts that they will never be able to pay what they owe to credit card companies. Filing Chapter 7 if successful could mean that debts owed to credit card companies can be erased and the consumer can have a fresh start.
On the other hand, individuals filing for credit card bankruptcy using Chapter 13 means submitting a repayment plan to creditors. The repayment plan should state how the consumer would pay the debt. Chapter 13 is also known as wage earner bankruptcy. This is a more complex type than Chapter 7. This is for individuals who can pay their debts or some of their debts, but needs more time to be able to pay. This type can prevent foreclosure of properties, unlike Chapter 7, which entails the court appointed trustee to seize an individual’s belongings and turn them into cash for the creditors. This could thus mean no car, home and other key possessions for the consumer during their fresh start. But Chapter 13 type requires an individual to have a steady income and the discipline to stick with the court approved payment plan for several years. Only a third of the people who filed for this type were able to complete their financial obligations.
Filing for credit card bankruptcy could mean that they will stop debt collection calls. The trustee handling the case informs the creditors about the filing. An individual can also stop a debt collection call by submitting a letter to the debt collector. They can do this without filing but this does not mean that debts are erased and that credit card companies will not take action against the consumer.
However, filing for bankruptcy may solve a person’s debt problems, but he/she must be honest in declaring assets. If an individual is caught trying to hide properties, the credit card bankruptcy filed can be canceled. In addition, filing can affect a person’s credit standing. This can stay in a person’s record for up to ten years. Nevertheless, consumers must also remember that it should not affect a person’s job. It is against the law to fire someone because of bankruptcy.
In addition, consumers must know that they will have to undergo financial counseling before they file for [http://www.bankruptcyleadfiles.com/Bankruptcy_and_Card_Credit_Debt_and_Personal_Loans.html]credit card bankruptcy. This is usually done 180 days before filing. Counseling takes around two hours and costs approximately $80 or less. This can also be done online.
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By Naomi Smith
Article Source: http://EzineArticles.com/?expert=Naomi_Smith
