Managing debt can be an extremely stressful process. Debt can often become unmanageable as a result of serious illness, divorce, job loss, accidents or ongoing budget mismanagement. If you need to access bankruptcy as a last resort, you may be wondering what will happen to some of your credit products such as your personal credit cards after you file. Here is a quick exhalation of what to expect after you file for bankruptcy with your credit cards.
Chapter 13 Bankruptcy
Under Chapter 13 bankruptcy, you will establish a debt repayment plan for your debts. Under this repayment plan you will have protected assets such as your home and then have a debt repayment plan that can handle payments to all of your creditors. Throughout the process of this bankruptcy, a person will have to surrender their consumer credit cards and they will not be able to incur any new debt. This could mean that you won’t have access to any credit products throughout the process of your repayment which can sometimes take 3 to 5 years.
Chapter 7
Under Chapter 7 bankruptcy the courts will sell off a person’s assets in order to pay creditors. The debtor will also eat free of liability to pay back a large amount of their debt. Under Chapter 7 bankruptcy, most high earners will not be able to qualify for the format. It is also highly unlikely that you will be able to retain any of your credit products after filing for Chapter 7. Most credit card companies will instantly cancel cards as soon as they find out you have filed for Chapter 7 bankruptcy. There may also be an embargo on how long you will have to wait before you start applying for new credit card products. Chapter 7 bankruptcy stays on your record for up to 10 years but you may be able to start applying for credit products after 2 to 3 years.
Chapter 11
Chapter 11 bankruptcy is common for corporations and with marriages. All debts will need to be paid and debts can be restructured to work out a repayment plan that will make the most sense for individual finances. In order to apply for other credit cards or access credit products, you will be responsible for paying your debts in full under this type of bankruptcy.
This post was written by Trey Wright, a bankruptcy attorney in Tallahassee, FL. Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, which specializes in areas related to bankruptcy law, estate planning, and business litigation.
