If you are struggling to stay current on outstanding credit card balances, it may be in your best interest to file for bankruptcy. However, that largely depends on how large your outstanding balances are, your income and your ability to pay down the debt in a timely manner. Let’s take a closer look at what you should consider before heading to a Michigan bankruptcy court.
Can you afford to make more than the minimum monthly payments?
Bankruptcy may be the best way to eliminate credit card debt if you can’t afford to make more than the minimum monthly payments. This is because you may incur thousands of dollars in finance charges over the course of several years by making just the minimum required payment. Filing for Chapter 7 bankruptcy may enable you to eliminate your credit card debt in a matter of weeks and without paying anything to your existing creditors.
Can you repay the debt in less than five years?
If you don’t think that you can repay your current balances in less than five years, it may be in your best interest to file for bankruptcy. This may also be true if your monthly payments total more than 50% of your monthly income even if you can pay down your debt in less than 60 months.
Generally speaking, credit card debts can be eliminated by filing for Chapter 7 bankruptcy. Depending on the circumstances of your case, they may also be reduced or eliminated by filing for Chapter 13 bankruptcy. After the debts are discharged, you typically have no obligation to make future payments. While the case is ongoing, you may be protected by an automatic stay, which prevents creditors from taking steps to collect on an outstanding balance.