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Bankruptcy and Credit Card Debt - Chapter 7 and Chapter 13 Bankcruptcy

Bankruptcy and credit card debt do not necessarily need to go hand in hand. While starting with a clean slate might seem tempting it should be the absolute last resort for dealing with out-of-control debt. It is strongly recommended to attempt other debt elimination strategies before considering bankruptcy as an option.

But what if you've explored and exhausted all available debt management options and realize that they won't work for you? Unfortunately repayment of debt is not always possible, especially when those debts are very high and money is not available (and won't become available) to help you pay them. In this case filing for bankruptcy may be your only option. Bankruptcy and credit card debt enjoy a close relationship simply because debt is the main reason people declare themselves bankrupt.

Bankruptcy and credit card debt have some important drawbacks however. When you file for bankruptcy your credit record will reflect this information for ten years. That is a long time. Having this data on your credit report will make it difficult or even impossible to get a loan for a car, house, or even your child's education. It is also expensive to file for bankruptcy. You will need to pay attorney and court fees in the hundreds and if you don't or can't you won't qualify for relief.

There are two kinds of personal bankruptcy and credit card debt relief that you can apply for: Chapter 7 and Chapter 13. In a chapter 7 bankruptcy most of your debts will be released except for alimony, child support, taxes, loans obtained through filing false financial statements, loans not listed in the bankruptcy petition, legal judgments against the petitioner, and student loans. You will have to give up your assets in this kind of debt relief plan. In a chapter 13 filing you keep your assets but the court takes control of your money and figures out a repayment plan over three to five years.

If it is at possible consumers should avoid both of these situations. If you can use your personal savings, 401K plan or a loan from a family member to pay off your debt, then do so. It is preferable to having poor money management reflected on your credit record for such a long period. Bankruptcy and Credit Card Debt Relief filing should be avoided where at all possible.

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