We’ve written a series of blog posts answering questions regarding credit cards and bankruptcy and their financial impact. Call (262) 827-0375

Bankruptcy and Credit Card Debt

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Bankruptcy has become an increasingly popular option for debtors in the past decade, with experts crediting this rise to the increasing instability of the economy and low-income families. While bankruptcy has traditionally been pursued by those who have lost their job and fallen into overwhelming debt, recent statistics show that it is now an option for those struggling with accumulated credit card debt. It’s important for you, as a consumer, on this issue to be informed before making any decisions that could have serious repercussions. This is why you should try to avoid accumulating too much debt in the first place by making conscious decisions about how you spend money.

What is Bankruptcy?

Bankruptcy is a legal process that allows debtors to withdraw from their debts by declaring bankruptcy. The filing typically occurs before the defendants’ assets are liquidated to pay the creditors. Borrowers retain property ownership and see their income, salary, or Social Security payments garnished. Jurisdictions of law broadly vary relative to the types of debts that can be included in bankruptcy. In the United States, each of the fifty states has laws regarding what debts can be discharged through this process. It allows individuals earning some income to create a repayment plan that gives them up to five years to repay their debts.

A chapter 7 bankruptcy case is a liquidation bankruptcy case that typically takes four to five months to complete. Chapter 7 bankruptcy petitions are filed under federal law and are governed by the federal Bankruptcy Code. The court in which you file your petition will determine whether you qualify for this type of bankruptcy and if it is approved, it is usually effective within four months. There are two types of chapter 7 bankruptcies, a straight chapter 7 bankruptcy and a chapter 13 reorganization. Those who qualify file under a straight chapter 7 bankruptcy in Wisconsin because it requires no repayment plan. To file for chapter 7 bankruptcy, the steps are as follows:

1. Credit Counseling

Complete pre-file bankruptcy counseling sessions before filing. This is a mandatory step that happens before filing for bankruptcy. It will help you to better decide on what type of bankruptcy you need, determine your liabilities, and understand how debt consolidation, debt settlement, and personal finance can work for you. The class is designed to provide an overview of various options and strategies and help you determine what type of bankruptcy would work best for you. Both federal and state law requires credit counseling as a means to educate individuals about their options before filing for bankruptcy and as a way to avoid defaulting on debts.

2. Find an Attorney

If you are a high-class professional, you must find an attorney specializing in bankruptcy who can help you navigate the process. A qualified bankruptcy attorney will use their knowledge and experience to guide the client through the process and ensure they can successfully file and be protected under the laws in place. An attorney can help you understand the process, help you make a plan, and negotiate with your creditors to file a bankruptcy petition on your behalf. Finding an attorney who can counsel you on all your options is important. If filing for chapter 7 bankruptcy, contact legal aid or pro-bono attorneys who can help with fees or payments.

3. File Paperwork

Once you have found an attorney and decided on what type of bankruptcy you will file, you can begin filling out paperwork. The paperwork needed varies by state, but the forms required to start the case usually include a petition, schedules, and the codebtor information. You will also need to complete credit counseling. The chapter 13 bankruptcy wisconsin petition is the most difficult to file, and certain steps must be followed to file a schedule of assets and liabilities. If you decide to file for chapter 13 bankruptcy wisconsin, it will stay in effect for three to five years and keep you from having your debts discharged.

4. Trustee Takes Over

Once forms have been submitted to start the case, the debtor will be assigned a bankruptcy trustee, who will act on behalf of the debtor. They are responsible for ensuring that creditors receive payments and that all court orders are followed. This means paying all debts and fulfilling any other official duties as they are required.

5. Meeting of Creditors

After completing the education course, a meeting of creditors must be conducted. The meeting is mandatory and will allow you to meet with your creditors before filing for bankruptcy to prepare for this next step. This is when all of the creditors are made aware of your intentions and will also be able to tell you about their rights and those of their respective attorneys. Your lawyer will represent them at the meeting and help make any questions or concerns known.

6. Education Course

The second step is to take an education course. This will help prepare you for the next step, filing for bankruptcy. The course covers what to expect from a bankruptcy case and information about credit counseling and budgeting options. The education course is an important step in the pre-filing process. This is when you hear about opportunities and strategies to help you through your difficult financial situation. The class will also help you determine what will be best for you in the long term by explaining the basics of debt management and personal finance.

7. Your Eligibility is Determined

If you have completed the requirements for chapter 7 or chapter 13 bankruptcy, your petition will be filed by the bankruptcy trustee, and your eligibility will be determined. You may have to appear in court if your case needs to be reviewed. Your attorney will help you prepare the required documents and ensure everything is complete, correct, and up-to-date. This meeting aims to determine what type of bankruptcy you qualify for. This is how the court system becomes aware of your intention to file for bankruptcy, informing them of what kind of bankruptcy you will be filing. This also begins the necessary credit counseling sessions before you can start the case.

Chapter 7 bankruptcy in Wisconsin allows individuals to begin again after financial troubles have become too much to handle. The basic process starts with finding an honest and reputable attorney to help you work through the case. Once that is determined, the next step is completing the credit counseling class and filing paperwork with the court system. During this time, it’s important to learn as much as possible about your options and what type of bankruptcy would suit you.

Applying for Credit Cards After Bankruptcy

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You may feel awash in debt, but reluctant to declare bankruptcy because you fear losing all your credit cards. It is true that you will lose access to your credit cards, and will likely have them shut down. But does that mean it’s impossible for you to get new credit cards after bankruptcy? No. You can apply (and get) credit cards after bankruptcy, and rebuild your credit. This post lays out what you need to know to apply successfully for credit cards after bankruptcy

Discharged Bankruptcy

First of all, it’s important to know that your bankruptcy must be discharged before you can make an application for a credit card. If you are pursuing Chapter 7 bankruptcy, that discharge usually happens within 4 to 6 months. With Chapter 13 bankruptcy, though, you may think the bankruptcy is done when all the paperwork is complete and been approved, but it is not. You aren’t officially discharged until the 3 to 5 year plan is complete. If you would like to apply for a credit card before that time, you will need the court’s approval to do so.

New Credit Cards

Although your current credit cards will be unavailable to you once you declare bankruptcy, there are credit cards specifically designed for those working to re-establish creditworthiness. These credit cards fall into two categories: secured and unsecured credit cards. Once you demonstrate your ability to make monthly credit card payments, other institutions will begin to offer you credit cards as well.

Secured Credit Card

A secured card is one where you place a certain amount of money on deposit with the credit card company. This kind of credit card is usually successful even with a fresh bankruptcy. With a secured card, the credit limit you receive is typically equal to the amount of the security deposit you put down. You may think that a secured credit card is rather pointless; however, using it wisely re-establishes creditworthiness. Another benefit is that most secured credit cards shift to regular ones after you have demonstrated an ability to pay your monthly charges for a specified period of time.

Unsecured Credit Cards

A small number of unsecured card issuers will not check your credit score or may be willing to extend a line of credit to you after your bankruptcy is discharged. Such cards typically come laden with fees and sky-high interest rates, so be warned. These kinds of credit cards may cause you to end up in financial distress again.

Re-establishing Creditworthiness

Having a credit card gives you the opportunity to re-establish your creditworthiness. Once you do that, you will begin to receive other credit card offers. Here is the best way forward:
*Be sure to pay your credit card bills on time every month. Payment history is the single biggest factor affecting your credit, accounting for approximately 35% of your FICO credit score.
*Make a plan to pay off your credit card charges. The amount of total credit you use as a percentage of your credit limit also weighs in at 30% of your score.
*Sign up for programs that count alternative payment behavior. There are programs that report your payment of regular monthly bills like your cell phone, utilities, or streaming services from your checking account.

Pursuing bankruptcy will almost certainly mean that you lose access to your current credit cards; but it doesn’t mean that you’ll never have credit cards again. The experts at Burr Law can guide you through the whole bankruptcy process, including how to rebuild your credit afterwards.

What Happens to Your Credit Cards When You File for Bankruptcy?

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When your financial situation is overwhelming, you may consider filing for bankruptcy. One of your worries might be what would happen to your credit cards should you pursue bankruptcy. That’s a legitimate concern; you may well lose access to your credit cards. Then the question becomes whether filing bankruptcy would bring more benefits than the detriment of losing your current credit cards. In this post, we’ll explore what happens with credit cards when you pursue bankruptcy.

What Kind of Debt Is it?

Credit cards are unsecured debt. Unsecured debt refers to any kind of debt that is taken on to buy everyday goods and services. Credit cards issued by banks or other financial institutions, department store cards, gas cards–all are examples of revolving credit. It is unsecured because you haven’t had to offer any kind of collateral in order to get it. Unlike your auto loan, where the vehicle itself functions as the collateral, credit card companies offer you short-term loans that you agree to repay with the stated interest. You can pay for your groceries with your credit card just like you can buy a computer with your credit card. In either case, the credit card company cannot come and take the food out of your refrigerator, or the computer off your desk. Since there is no collateral with credit cards, there can be no repossession.

Credit Card Interest

Because credit cards are actually short term loans, they charge a high rate of interest. In the first 3 months of 2022, Americans’ credit card balances reached $841 billion, and the average credit card interest rate is 21.33%. Department store interest rates are even higher. So there is a lot of money in play. If you pay your minimum amount due every month, you’re paying only the interest and are locking yourself into perpetual, costly debt. Wisconsinites have an average of $4587 on their credit cards. That means that if you want to pay off the entire amount in 6 months, you have to make monthly payments of over $800. If all of this sounds discouraging, you’re not alone.

Credit Card Debt and Chapter 7

Chapter 7 bankruptcy is called Liquidation Bankruptcy, but don’t let that name scare you off. While it is designed to repay a portion of your debts through the sale of your assets, there are exemptions, and the experts at Burr Law can make sure your car and your home remain yours. The truth is that using exemptions to their fullest, you can completely eliminate your credit card debt while keeping your most valuable possessions. There is no minimum or maximum amount of debt needed to file a Chapter 7 bankruptcy. There is an income status requirement, though. Your income needs to be equal to or below Wisconsin’s median income, $64,168. If you are close to or slightly over that number, the professionals at Burr Law can help with timing or calculation to make Chapter 7 work for you.

Credit Card Debt and Chapter 13

Chapter 13 bankruptcy functions more like a reorganization. A trustee assigned by the bankruptcy court draws up a plan whereby you repay a portion of your debts over the course of 3 to 5 years. Your creditors then need to agree to the plan, and the bankruptcy court approves it. Credit card debt is often, but not always, eliminated. Even when it is not entirely written off, you will end up having to repay only a small portion of your credit card debt. With this type of bankruptcy, you will retain your car and your house as well. There is no income status requirement, though there is a maximum debt level. To be eligible to file for Chapter 13 bankruptcy, you must have no more than $419,275 in unsecured debt and no more than $1,257,850 in secured debt, which includes mortgages and car loans.

Basically, if most (or all) of your crippling debt is credit card debt, you might find that it’s worth it to lose access to your current credit cards and get rid of that debt. The best course of action is to contact the experts at Burr Law. They can listen to your specific situation and guide you to the best decision.

Rebuilding Credit After Bankruptcy

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When you declare bankruptcy, you are able to eliminate or diminish your debt, but it does leave its mark. Any credit cards you have when you file for bankruptcy will be unavailable to you, and the bankruptcy stays on your credit report for 7 to 10 years. That doesn’t mean that you are doomed to live without any credit resources or loans for that entire time. Bankruptcy is often the wisest choice, and there are steps you can take in the short and longer term to rebuild your credit. In this blog, we’ll explore some practical ways to do that.

Adhere to Bankruptcy Agreements

Whether you declare Chapter 7 or Chapter 13 bankruptcy, you have entered into a legally binding agreement. In Chapter 13, that means that a court-appointed trustee takes control of all of your disposable income and pays your creditors with it. This situation usually lasts from three to five years. It is imperative that you inform the court of any changes to your disposable income during this period. If you have filed Chapter 7 bankruptcy, that eliminates all your unsecured debt. However, you may have entered into a Reaffirmation Agreement with your auto lender in order to keep your car. If so, you must prioritize making those monthly payments.

New Credit Cards

Although your current credit cards will be unavailable to you once you declare bankruptcy, there are credit cards specifically designed for those working to re-establish creditworthiness. These credit cards often have low credit limits and higher interest rates to begin with; those elements switch as time passes and you use the card wisely. Once you demonstrate your ability to make monthly credit card payments, other institutions will begin to offer you credit cards as well.

Understanding Your Credit Report

Bankruptcy will almost certainly lower your credit score, but it you have had delinquent accounts and history of late payments, you may be surprised to find that your credit score does not plummet. Rebuilding your credit score depends on understanding how your credit score is calculated. Not every action has the same impact. For instance, one of the most important factors is the amount owed. Declaring bankruptcy actually makes your amount owed negligible. The most important factor, though, is payment history. While you cannot change your past, you can certainly control what your payment history becomes.

Credit Report – Time Frame

Your credit report is not a static document. Your credit score changes all the time, and actions that have lowered your credit score do disappear from your credit report. The time frame varies from two to ten years. A Chapter 7 bankruptcy usually remains on your report for 10 years, while a Chapter 13 one stays on for 7. Crucially, the severity of the impact diminishes with time, too. So a bankruptcy five years ago will matter less than when freshly filed, especially if it appears with five years’ worth of on-time payments.

Credit Report – Repair

Declaring bankruptcy does not have to be devastating to your ability to get credit, and it can be mitigated. The experts at Burr Law can guide you in re-establishing your credit in ways that meet your particular situation. Remembering that payment history is crucial, and that many accounts do not typically report on-time payments, you can work to have your timely payments noted. While auto loans, mortgages, credit cards and some others are typically reported, other things like utilities, phone payments, and even streaming services can be reported. If you have a monthly expense that isn’t being reported and you want those timely payments to count, Burr Law can help.

Rebuilding credit after bankruptcy is certainly possible. The experts at Burr Law can advise you on that as part of your bankruptcy service.

Ways You May Be Hurting Your Credit Score

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Your credit score is important for all financial matters. When you want to get a credit card, finance a car, or take out a home equity loan, your lender will always consider your credit score before agreeing to a loan. And the terms of that loan will also depend on your credit score. If your credit score is near perfect, you may find that your lender will charge much less for closing costs, for instance. Finally, some employers are now checking prospective employees’ credit scores before finalizing job offers. Your credit score means a lot, so it’s crucial that you know how to maintain a positive one. In this post, we explore ways that you may be hurting your credit score.

Missing Payments

Late payments are the most common factor that hurts people’s scores. It’s so easy to miss a payment if your life is busy, and paying a little late may seem harmless. However, it has a disproportionate impact on your credit score. Your credit report indicates any payments that are late, and the length of time. Even one 30-day late payment can have a substantial negative effect. If at all possible, set up direct payments for your credit card payments and other monthly obligations. That way, you won’t unintentionally miss a payment due.

Balance to Credit Ratio

Your balance-to-limit ratio is also called your credit utilization. Here is a simple way to calculate it: add up separately all of your credit card balances and then all of the limits on your credit cards. Then divide the total balances by the total limits. This is your balance-to-limit ratio. As a general rule, a lower ratio means a better credit score. As a rule, you should try to keep your credit card utilization rate below 30%. However, it is also a bad idea to completely pay off your credit cards every month. You could be hurting your credit score without realizing it, even if you never make any late payments on those accounts. It’s a bit of a tightrope to walk; doing the calculation twice a year should keep you in the golden zone.

Hard Inquiries

Each time a lender requests your credit reports, a hard inquiry is recorded in your credit file. These inquiries stay in your file for up to two years. A hard credit pull can cause your score to go down slightly for a short period. Lenders look at the number of hard pulls to gauge how much new credit you are requesting. Too many inquiries in a short period of time can signal that you are potentially slipping toward financial problems by suddenly taking on a lot of new debt. Be aware when applying for new loans, and do not crowd applications together.

Timing of Closing Credit Card Accounts

Closing a credit card account can cause your overall balance to credit ratio to increase, which is a sign of risk. As a result, your credit scores may drop. Generally, a brief dip in your credit score won’t matter one way or the other, but If you are planning to make a major purchase (like a house or a car) in the next three to six months, it’s better to forego closing any open credit card accounts.

Beware of Cosigning Loans

You probably know that when you cosign for a loan, you are promising that if the person you are cosigning for doesn’t pay the debt, you will. What you may not know is that the loan will appear on both of your credit reports along with the payment history. If the primary debtor doesn’t pay their loan on time, that late payment will hurt your credit too.

These are some of the ways that you may be hurting your credit scores without really knowing it. Keeping in mind the tips above and maintaining an awareness of your financial situation should help you attain and keep a good credit score. Of course if you default on your financial obligations that will damage your credit score as well. For more advice particular to your personal situation, contact the professionals at Burr Law.

Understanding Your Credit Report

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Finances are complicated, and they are further complicated by your credit report. Your credit score fluctuates constantly, and knowing how various things will affect your credit report is important to your overall financial planning. Here, we’ll explore the various factors that cause your credit score to go up or down, and how long those factors will continue to affect your credit score.

Fair Credit Reporting Act

The Fair Credit Reporting Act–also known as the Consumer Credit Protection Act–was enacted on October 26, 1970. It is designed to protect the integrity and privacy of a person’s credit information. It requires credit reporting agencies, and those that report credit information to those agencies (like credit card companies), to make sure all information is fair, accurate and confidential. Information in a consumer report cannot be provided to anyone who does not have a purpose specified in the Act.

Components Of Your Credit Report

Before exploring how various actions affect your credit report, it’s important to know how your credit score is calculated. Not every action has the same impact. Here is how your credit score is determined:
Payment history – 35%
Amounts owed – 30%
Length of credit history – 15%
Credit mix – 10%
New credit – 10%
This makes up your FICO credit score, the most common method used. Obviously, payment history is crucial and it’s important to remember that even if a company does not report your usual on-time payments, they will certainly report a missed or late one.

Time Frame

Your credit report is not a static document. Your credit score changes all the time, and actions that have lowered your credit score do disappear from your credit report. The time frame varies from two to ten years. Generally, those negative actions will fall off your report after seven years. Another thing to understand is that the severity of the impact diminishes with time, too. So a bankruptcy five year ago will matter less than when freshly filed.

Credit Inquiries

One of the most insidious ways that your credit score can be lowered comes from credit inquiries. Also called “hard inquiries” or “hard pulls,” a credit inquiry of this type happens when you apply for another credit card. It’s important to know that even department store credit cards can cause a hard pull. Credit inquiries remain on your credit report for two years, and can have a negative impact on your credit score—from 5 to 20 points per pull.

Seven-Year Itch

Most negative actions will remain on your credit report for 7 years. These include debts that have gone into collection, charge-offs (where the business is no longer actively trying to collect the debt), and late payments that are over 30 days past due. The later the payment, the worse it is for your credit score. It also includes Chapter 13 bankruptcy, starting from the date of filing. Chapter 7 bankruptcy stays on your credit report for 10 years.

Credit Repair

When you have financial difficulties, your credit score will be impacted, whether or not you declare bankruptcy. This impact does not have to be devastating, and it can be mitigated. The experts at Burr Law can guide you in re-establishing your credit in ways that meet your particular situation. Remembering that payment history is crucial, and that many accounts do not typically report on-time payments, you can work to have your timely payments noted. While auto loans, mortgages, credit cards and some others are typically reported, other things like utilities, phone payments, and even streaming services can be reported. If you have a monthly expense that isn’t being reported and you want those timely payments to count toward your credit score, Burr Law can help.

Understanding your credit report can lessen your anxiety around declaring bankruptcy. When your credit score is suffering from late payments and debts in collection, bankruptcy isn’t going to make things worse. It can make things a lot better, and the professionals at Burr Law can guide you in repairing your credit too.

Overwhelmed with Debt?

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The COVID-19 pandemic has had dire economic consequences for many people, and there have been protections put in place to help people survive this difficult time. Those aren’t going to last forever, though, and you may be looking at your financial situation and wondering just how you’re going to manage. If you feel overwhelmed with debt, it’s important to think things through now and have a plan in place while you still have a number of options. There are basically three different approaches you can take: debt consolidation, debt management, and bankruptcy. This post explores each of them.

Debt Consolidation

Debt consolidation is just what it sounds like: you gather all your debts into one place so that you’re making one payment a month. There are several ways to consolidate your debt. If most of your debt is unsecured credit card debt, you can take out another credit card that offers 0% interest for a period of time (often 12 to 18 months) and then transfer your other credit card debt onto that new card. You then have that given time to pay down the principal. This method only works if all or most of your debt is credit card debt. If you have other sources of debt, you may need to take out a consolidation loan. These loans are financed by banks, and the main concern here is that you trade your unsecured debt for secured debt, as most will require collateral. Even if your consolidation loan doesn’t require specific collateral, it may well have a cross-collateralization clause. That means that if you get a consolidation loan from the same bank that financed your auto loan, and you fall behind on your consolidation loan payments, the bank can repossess your car. So debt consolidation can certainly work, though it has some important limitations, and poses some significant risks.

Debt Management

There are a number of debt management companies that will act on your behalf to manage your financial situation. The debt management company negotiates with the credit card companies on your behalf, and establishes a repayment plan for you. It’s important for you to know that agreeing to a debt management plan comes with a number of hidden costs – monetary and otherwise. You will be expected to pay an enrollment fee as well as a monthly fee for each credit card on the plan. Also, most credit card companies will require that an account entering into a debt management plan be closed, so you lose your access to credit. And the fact that you’re engaged in a debt management plan will be noted on your credit report. Most debt management plans run for three to five years, and at least half of clients do not successfully complete the plan.

Bankruptcy

Individuals usually file either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy is known as “liquidation” bankruptcy, and in order to qualify for it, you must not make more than your state’s median household income. In Wisconsin, that amount is $67,355 (as of 2019, the latest available figures). Although the word liquidation sounds threatening, the truth is that there are exemptions and you will almost certainly keep your home (if you have a mortgage) and your car. If you have a second home or other luxury item, those may be sold to pay your debt. Chapter 7 bankruptcy is quick, usually taking three to four months, and it eliminates all your unsecured debt. Chapter 13 bankruptcy is also known as “wage-earner’s” bankruptcy. It functions a lot like the debt management plan; a trustee appointed by the court drafts a plan, you and your creditors agree to it, and then the trustee administers the plan. It lasts between 3 and 5 years. There is no means test like Chapter 7 bankruptcy, but there is a cap on how much you owe. To be eligible to file for Chapter 13 bankruptcy, you must have less than $419,275 in unsecured debt, like credit cards or medical bills, and you also can have no more than $1,257,850 in secured debts, which includes mortgages and car loans.

If you’re overwhelmed by debt and considering your financial future, you have options. Contact the experts at Burr Law to talk through your specific situation, and have them help you chart the best course forward.

Credit Card Debt: Can Credit Card Companies Repossess My Items If I Don’t Pay?

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Credit Card Debt is Unsecured Debt

Unsecured debt refers to any kind of debt that is taken on to buy everyday goods and services. Credit cards issued by banks or other financial institutions, department store cards, gas cards–all are examples of revolving credit. Credit card debt is unsecured because you haven’t had to offer any kind of collateral in order to get it. Unlike your auto loan, where the vehicle itself functions as the collateral, credit card companies offer you short-term loans that you agree to repay with the stated interest. You can pay for your groceries with your credit card just like you can buy a computer with your credit card. In either case, the credit card company cannot come and take the food out of your refrigerator, or the computer off your desk. Since there is no collateral with credit cards, there can be no repossession.

Credit Card Debt Can Spiral

It’s easy to purchase things with credit cards, and almost without you noticing, you find your credit cards maxed. With all of the economic disruptions caused by the pandemic, you may have had to rely more heavily on credit cards, as well. The minimum payment due only pays the interest, and when even that becomes difficult, you need to consider your options. This situation is not unusual. The average American had a credit card balance of $6,200 in 2019, according to Experian. And revolving credit with its high interest means disaster for those who can’t pay the balance in full every month. That means you continue to accrue additional interest charges from month to month. The average annual percentage rate on all credit cards was 20.21% as of August 2020. Department store credit cards averaged 24.22%. A single late payment can boost your interest rate even higher.

Bankruptcy Deals With Credit Card Debt

If your credit card obligations are driving you to the breaking point, then bankruptcy may be your wisest option. In Chapter 7 bankruptcy, credit card debt can be entirely eliminated. You also have the option of filing for Chapter 13 bankruptcy where you enter into an agreement with your creditors to repay a portion of your debt over 3 to 5 years.

Chapter 7

Chapter 7 bankruptcy is also called Liquidation Bankruptcy, but don’t let that name scare you off. While it is designed to repay a portion of your debts through the sale of your assets, there are exemptions, and the experts at Burr Law can make sure your car and your home remain yours. The truth is that using exemptions to their fullest, you can completely eliminate your credit card debt while keeping your most valuable possessions. There is no minimum or maximum amount of debt needed to file a Chapter 7 bankruptcy. There is an income status requirement, though. Your income needs to be equal to or below Wisconsin’s median income, which in 2018 was $62,629.

Chapter 13

Chapter 13 bankruptcy functions more like a reorganization. A trustee assigned by the bankruptcy court draws up a plan whereby you repay a portion of your debts over the course of 3 to 5 years. Your creditors then need to agree to the plan, and the bankruptcy court approves it. Credit card debt is often, but not always, eliminated. Even when it is not entirely written off, you will end up having to repay only a small portion of your credit card debt. With this type of bankruptcy, you will retain your car and your house as well. There is no income status requirement, though there is a maximum debt level. To be eligible to file for Chapter 13 bankruptcy, you must have no more than $394,725 in consumer credit debt and you also can have no more than $1,184,200 in secured debts, which includes mortgages and car loans.

Credit card debt can be overwhelming, but you don’t have to worry about your personal possessions being repossessed. If you’re interested in getting out from underneath crushing credit card debt, you might be wise to consider bankruptcy. Reach out to the professionals at Burr Law to discuss your financial situation. It may be that bankruptcy can entirely clear your credit card debt, or that it can be made into something manageable. You won’t know how close you are to relief unless you call now.

Consumer Credit Bankruptcy

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What Is Consumer Credit?

Although any type of personal loan could be labeled consumer credit, the term is usually used to describe unsecured debt that is taken on to buy everyday goods and services. Credit cards issued by banks or other financial institutions, department store cards, gas cards–are all examples of revolving credit. Installment loans are another kind of consumer credit, and the most common installment credit example is an auto loan. Consumer credit is not usually used to describe the purchase of a house; that’s considered a long-term investment and is usually purchased with a secured mortgage loan.

Consumer Credit Causing Financial Distress

If you find yourself struggling every month to pay each of your credit cards as well as your department store cards, your gas cards, and make your car payments (not to mention continuing to live), your situation is not unusual. The average American had a credit card balance of $6,200 in 2019, according to Experian. And revolving credit with its high interest means disaster for those who can’t pay the balance in full every month. That means you continue to accrue additional interest charges from month to month. The average annual percentage rate on all credit cards was 20.21% as of August 2020. Department store credit cards averaged 24.22%. A single late payment can boost your interest rate even higher.

Bankruptcy Can Offer Relief

If your consumer credit obligations are driving you to the breaking point, then bankruptcy may be your wisest option. In Chapter 7 bankruptcy, consumer credit debt can be entirely eliminated. You also have the option of filing for Chapter 13 bankruptcy where you enter into an agreement with your creditors to repay a portion of your debt over 3 to 5 years.

Chapter 7

Chapter 7 bankruptcy is also called Liquidation Bankruptcy, but don’t let that name scare you off. While it is designed to repay a portion of your debts through the sale of your assets, there are exemptions, and the experts at Burr Law can make sure your car and your home remain yours. The truth is that using exemptions to their fullest, you can derive the benefit of eliminating consumer credit debt while retaining your most valuable possessions. There is no minimum or maximum amount of debt needed to file a Chapter 7 bankruptcy. There is an income status requirement, though. Your income needs to be equal to or below Wisconsin’s median income, which in 2018 was $62,629.

Chapter 13

Chapter 13 bankruptcy functions more like a reorganization. A trustee assigned by the bankruptcy court draws up a plan whereby you repay a portion of your debts over the course of 3 to 5 years. Your creditors then need to agree to the plan, and the bankruptcy court approves it. With this type of bankruptcy you will retain your car and your house as well. There is no income status requirement, though there is a maximum debt level. To be eligible to file for Chapter 13 bankruptcy, you must have no more than $394,725 in consumer credit debt and you also can have no more than $1,184,200 in secured debts, which includes mortgages and car loans.

Consumer credit obligations can be crushing, but they don’t have to be. Reach out to the professionals at Burr Law to discuss your financial situation. It may be that bankruptcy can entirely clear your consumer credit debt, or that it can be made into something manageable. You won’t know how close you are to relief unless you call now.

MasterCard Gold Credit Card debt bankruptcy

Bankruptcy and the Credit Card Debt Crisis

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Millions of Americans struggle with debt. This is nothing new, but in modern times, we face a problem that previous generations never had. People are drowning in credit card debt.

Are you struggling with credit card payments? Filing for credit card debt bankruptcy may be the best choice. Here’s how the process works and why getting a Wisconsin bankruptcy attorney might help.

Bankruptcy and Credit Card Debt

The many bankruptcy laws in the U.S. are divided into chapters. Each chapter describes a specific kind of bankruptcy.

Chapter 7, or liquidation, bankruptcy lets you sell, or liquidate, your assets to raise enough money to pay off the creditors.

Chapter 13, or reorganization, bankruptcy is where you work with your creditors to come up with a repayment plan.

Choosing Your Debt Strategy

Which bankruptcy chapter is best for handling credit card debt? The size of your overdue bill, your employment status and other factors might force you to pick one or the other.

The laws can make things confusing. For instance, Chapter 13 is designed for people with enough income to repay their liabilities gradually. At the same time, it’s restricted to people whose debts fall below maximum limits.

Chapter 7 is the most common form of bankruptcy. As with Chapter 13, there are eligibility limits, but they apply to your income. Talking to a lawyer could make it easier to navigate these rules properly.

Putting Credit Card Debt Into Perspective

How big is the U.S. credit card debt epidemic? In late 2018, NerdWallet reported that these liabilities topped out at more than $420 billion. That’s a lot of money to owe, and almost 10 percent of people surveyed thought they’d be stuck with credit card debt for the rest of their lives.

Credit card debt that balloons out of control isn’t uncommon. The NerdWallet study also found that households with credit card debt typically had an average of $6,929 in revolving balances. Combined with the huge interest rates that most credit cards charge, these sums have the potential to ruin people’s lives.

Is Bankruptcy the Best Option? Dispelling Common Myths

Filing for bankruptcy under Chapter 7 or Chapter 13 doesn’t mean losing all of your possessions. Most necessities are exempt, and the idea isn’t to fill your life with hardships anyway. Instead, it’s all about making it easier for you to bounce back.

Credit card debt bankruptcy doesn’t ruin your credit either. If you’re considering filing, then it’s likely that the credit rating damage has already been done. Petitioning the bankruptcy court to help you resolve your credit card debts is the most logical option. It wipes the slate clean and moves you toward greater financial responsibility.

To talk with a local bankruptcy lawyer experienced in clearing away burdensome credit card debt, call Burr Law Office today at (262) 827-0375.