Unfortunately, many people discover too late that credit card debt can quickly get out of hand and become completely unmanageable. Just a few missed payments will cause the interest rate to jump from under 10% to 25% or more. With more of the monthly payment being applied to interest, late fees, and over-the-limit fees, the credit card bill increases instead of decreasing. Some people turn to desperate measures to lower credit card bills.
Borrowing Money to Lower Credit Card Bills
Borrowing money against your home, vehicle, or other assets is not a wise option to lower credit card bills. You are turning an unsecured debt into a secured debt. If you cannot pay the loan payments, you could lose your home, vehicle, and other assets. Borrowing money from your retirement accounts is also dangerous because you are endangering the income you will need when you retire.
When you borrow money to lower credit card bills, you are not decreasing the amount of debt you owe. You are simply transferring debt from one account to another account.
Consolidation Companies to Lower Credit Card Bills
Using a consolidation company to lower credit card bills is another option that many people consider; however, there are disadvantages to using a consolidation company. Your creditors are not required to work with the consolidation company; therefore, you may not be paying off all of your credit card debt. If the credit card company agrees to “write off” a portion of the debt, you will be required to report the amount that was written off as income on your tax returns. Lastly, many consolidation companies charge a large fee for their service. You are paying a company for something you can do yourself by negotiating directly with your credit card companies.
Filing Chapter 7 to Lower Credit Card Bills
Filing a Chapter 7 bankruptcy case will lower credit card bills by completely eliminating the debt. If you qualify for a Chapter 7 bankruptcy case, you can discharge all of your credit card debt, as well as other unsecured debts, through the bankruptcy. Most Chapter 7 bankruptcy cases are completed within four to six months, allow a person to retain all of his or her assets, and discharge most, if not all, of the person’s debts.
Filing Chapter 13 to Lower Credit Card Bills
If you do not qualify for a Chapter 7 case, you can still lower credit card bills by filing a Chapter 13 bankruptcy. You will pay a percentage of the credit card debt through the bankruptcy plan rather than paying the entire debt. Once you complete your bankruptcy plan, any remaining balance owed to the credit card companies will be discharged. You will no longer be legally liable for this debt and, unlike with the consolidation method, you will not be required to report the discharged balance as income on your tax returns.
Contact an Experienced Mount Holly Bankruptcy Attorney
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The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
Contact our office at 609-267-5297 to schedule your free consultation to discuss bankruptcy and non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
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