Dealing with credit card debt

Most of us have at least one credit card. Whether we use that card for emergencies or for everyday purchases, we know that failing to pay off the card at the end of the month will result in interest being added to our account. As long as we at least pay the minimum amount each time a payment is required, the credit card issuers will generally leave us alone.

If we miss a payment for whatever reason, these companies will add extra fees to the balance that we owe. These charges can quickly get out of hand, especially if an individual is experiencing financial problems. Repeated missed payments will result in the companies sending letters or making phone calls to the cardholders threatening to begin collection actions.

When credit card companies pursue individuals for these past-due debts, debtors do have options that may allow for the debts to be reduced. They may negotiate with the companies to reduce the balance or monthly payments to a more affordable amount. This can be difficult to accomplish, as some companies may be reluctant to agree to such an arrangement.

Those with credit card debt may also consider filing for bankruptcy protection if the company becomes more aggressive in trying to collect this debt. Once an individual files for bankruptcy, the automatic stay brings all collection actions to an end while the bankruptcy is proceeding.

Additionally, in most circumstances, credit card debt is dischargeable, which means that the debtor's responsibility to repay the debt will be eliminated by bankruptcy. Individuals often file for Chapter 7 or Chapter 13 bankruptcy, depending upon their financial situation. In Chapter 7, the debtor surrenders his or her nonexempt assets, which are sold and the proceeds applied to the debtor's unsecured debt. The balance of the dischargeable debt is discharged.

In Chapter 13 bankruptcy, the debts are paid off in installments, and the debtor will be required to make these payments for three to five years. This type of bankruptcy is most common when individuals have sufficient disposable income to make payments to the trustee for the benefit of the creditors, or they are behind on a house or car payment and need a method to get current on the loan.

After the process is complete, the debtor's responsibility to repay the credit card debt will be extinguished. This allows the individuals an opportunity to rebuild their finances, and emerge from the bankruptcy in a positive place.

Your financial situation can be quite complicated, and it may take a professional to help you understand the choices that are best for you. If you are experiencing difficulty making your credit card payments, speak to an experienced bankruptcy attorney about your situation. Do not wait to address this issue, as any delay could cause your debts to increase significantly.