Credit cards are a major cause of debt in the United States. Many people apply for credit cards to build their credit or help them get through a difficult financial stretch. However, what might start off as an innocent pursuant and a modest line of credit can easily turn into debt that grows out of control and causes major problems for an individual or family.
People don’t start off thinking they’re going to end up in serious debt. Many have good jobs and solid finances. The problem is the allure of acquiring something before you have the money to actually pay for that something. And doing so can get you into trouble with your finances.
If you’re currently struggling with credit debt, bankruptcy can be one way to work yourself back toward financial freedom. If you can’t make your payments and are behind on all of your bills, bankruptcy could be a viable option for you.
What kinds of bankruptcy can individuals file?
The most common kinds are Chapter 7 and Chapter 13. These two types of bankruptcy work differently from each other. Chapter 7, also known as liquidation bankruptcy, eliminates your debts after you liquidate as many of your assets as the court requires. Chapter 13 bankruptcy is more like a repayment plan, but at a reduced value.
Either type of bankruptcy will affect your credit score, but that doesn’t necessarily mean you won’t be able to obtain credit again. Most people begin to have credit options available to them again within two or three years, although a bankruptcy will stay on your credit record for seven to 10 years.
Though these are two popular forms of bankruptcy, there are also other options to choose from. Before you decide what to do, it can be helpful to talk to an attorney and financial advocate to learn more about your options.