Bankruptcy on credit cards is one of the number one reasons people file for bankruptcy. Credit card debt can easily get out of hand due to the promise of being able to pay later. However, interest rates and emergencies can increase the debt exponentially. Dealing with this overwhelming credit card debt can be stressful and financially draining. In Oklahoma, understanding how bankruptcy works and its implications for credit card debt can help you make an informed decision. There are two primary types of bankruptcy for individuals: Chapter 7 and Chapter 13. Each type has different procedures and consequences for credit card debt. In this article we will talk about what these types of bankruptcies can do for you regarding your credit card debt.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves the discharge of most unsecured debts. Unsecured debt includes credit card debt, because it is not secured by anything but the promise of paying them back later. Secured debts are debts that usually have some sort of collateral attached to them, like a vehicle. In this process, the bankruptcy trustee may liquidate non-exempt assets to pay off creditors. For example, if you have multiple vehicles, they could sell the ones that are paid off or have positive equity. Many people find that their assets are protected by exemptions under Oklahoma law.
To file for Chapter 7 bankruptcy, you must pass the means test. This test determines if your income is low enough to qualify. If you pass the means test, you can proceed with filing your bankruptcy petition. After filing, an automatic stay goes on your accounts, preventing creditors from pursuing further collection actions. Your credit card debts will be included in the list of unsecured debts and will be discharged at the end of the process. Thus, this relieves you of the obligation to pay them.
Chapter 13 Bankruptcy
On the other hand, Chapter 13 bankruptcy, also known as reorganization bankruptcy, allows you to keep your assets while creating a repayment plan. This plan is there to help you pay off your debts over three to five years. This type of bankruptcy is for individuals with a regular income who can afford to pay back a portion of their debts.
In Chapter 13 bankruptcy, you propose a repayment plan to the court. This plan consolidates your debts and allows you to make monthly payments to a bankruptcy trustee, who distributes the payments to your creditors. At the end of the repayment period, any remaining credit card debt is typically discharged. It’s important to note that the repayment plan favors debt that is secured versus unsecured. Therefore, if you have more unsecured debt than secured debt, you might have to pay off more credit card debt.
Other Considerations Before Filing Bankruptcy On Credit Cards
Filing for bankruptcy will significantly impact your credit score. Chapter 7 bankruptcy remains on your credit report for ten years, while Chapter 13 bankruptcy stays for seven years. Despite the negative impact, bankruptcy can also provide a fresh start and the opportunity to rebuild your credit over time. You can also only file bankruptcy every 8 years for a Chapter 7, and 2 years from the date of discharge for a Chapter 13.
Oklahoma law provides various exemptions that protect certain assets during bankruptcy. These exemptions include equity in your home, personal property, burial plots, 401k accounts, and tools of your trade. Understanding these exemptions is crucial, as they can help you retain essential assets while discharging your credit card debt.
Claremore Bankruptcy Attorneys
In conclusion, you can file for bankruptcy on credit cards in Oklahoma, with Chapter 7 and Chapter 13 being the primary options. Understanding the differences between these types of bankruptcy, their impact on your credit, and the exemptions available can help you make an informed decision. Consulting with a bankruptcy attorney is crucial to navigate this complex process and achieve a fresh financial start. Here at our firm, we pride ourselves on being able to bring you the debt relief you need. Reach out to us at Claremore Attorneys by calling 918-379-4872 or contact us online for a consultation.
