Carrying high balances on credit cards is a common practice in California. The cost of living is so high that, for many people, it offers the only way to make ends meet. Unfortunately, borrowing money via a credit card is expensive. If you only make the minimum payments, you may never pay it all off. So, can Chapter 7 bankruptcy filing help?
There are many types of debts that bankruptcy filings cannot erase. Student loans, for instance, tend to survive bankruptcy filings. However, you can usually get rid of your credit card debts under Chapter 7 bankruptcy.
Credit cards as unsecured debts
Borrowing capital via credit cards does not require you to offer your personal property as collateral. Because of this, financial professionals refer to it as unsecured debt. Other debts that tend to fall into this category include medical bills and personal loans. In contrast, secured debts include traditional auto loans and mortgages.
Chapter 7 may eliminate unsecured debts
NerdWallet points out that, if you qualify for Chapter 7 filing, you may successfully eliminate your credit card debts. To qualify, the court may require you to prove that you do not have the income or assets to repay your credit card debts. You may become disqualified if you recently filed another dismissed bankruptcy case or if you completed the bankruptcy process already in the last six years.
It is important to note that completing the filing process does not mark the end of your journey. Some important steps to financial recovery still remain. You may need to invest some time in rebuilding your credit score. If you lost your home in the process, you may also need to find somewhere else to live. Finally, you may also need to review your debt management plan to prevent the need for another bankruptcy filing.