Tips & advice on getting your finances back on track.
My wife and I are considering filing for chapter 7 bankruptcy. We have 12 credit cards with large balances. I have several personal credit cards that I use for my business and would prefer not to include them in the bankruptcy. The balances are low on those cards, but I am not in a position to pay off the balances before the bankruptcy. How would this work?
I am sorry to hear of your financial hardship. To answer your question, if you have balances on your credit cards, you must list them among the debts as part of the bankruptcy filing. If you are able to pay them off prior to filing, you are not required to list them. If you are unable to pay them off prior to filing chapter 7 bankruptcy, there is the possibility of reaffirming the debt.
Reaffirming the debt requires you to enter into a payment plan with the creditor, which must be approved by the court. The credit card company can cancel the card or reduce your credit limit when reaffirming. It is often not recommended to reaffirm credit card debt because you will lose all bankruptcy protection on that debt. The credit card company will make the final decision on how this will be handled.
I suggest that before you consider filing bankruptcy you seek credit counseling from a non-profit credit counseling agency, such as Navicore Solutions. A certified credit counselor will review all of your options with you. You can reach a certified credit counselor at 1-800-992-4557. If you decide that bankruptcy is your best option, please contact your local bar association for a list of licensed bankruptcy attorneys, and request a free consultation.
I would be remiss if I didn’t mention that bankruptcy typically does not fix the financial problem. If you are overspending or using credit cards to plug financial holes, you are only putting a bandage on the problem. You should take a look at what got you to this point and fix that problem. A credit counseling session can help you uncover the cause of the issue and provide you with an action plan to rectify the underlying problem.
Kim Cole is the Community Engagement Manager for Navicore Solutions. Kim provides financial education workshops and seminars to communities. Readers can submit general questions relating to personal finance, credit scoring, debt management, student loans, home finance or bankruptcy which may be highlighted in the next month’s edition. All identifying information will be kept anonymous.
Please send your questions via email to DearKim@navicoresolutions.org