Credit Cards: When to File for Credit Card Bankruptcy

Proper timing is always essential in everything you do even when filing for credit card bankruptcy. Although you may qualify for a Chapter 7 bankruptcy, there are times when you have to wait first. However, if you are currently facing an immediate problem, such as foreclosure, car repossession, wage garnishment, or judgment lien, declaring bankruptcy right away may be the ultimate solution. Delaying bankruptcy filing makes sense if you are going through the following situations:

1. Open for Mortgage Modification – If you have the opportunity to change your mortgage, now may not be the perfect time for you to file for bankruptcy. Nowadays, people use bankruptcy to postpone foreclosure. This is a good option, but some people tend to file earlier, causes them to get denied of mortgage modification. Lenders usually refuse to continue negotiations about mortgages once they learn you have declared bankruptcy. This is because such action will technically terminate the promissory section of your mortgage so there is nothing left for negotiation.

2. High Income – If you recently have a high income, you may want to delay filing for bankruptcy for a period of time. Your income for the past 6 months will determine if you qualify for Chapter 7 bankruptcy. If you have high income, you will only be eligible for Chapter 13 bankruptcy. This will require you to pay off a part of your debts.

3. Real Estate Property – If you have a home or a property that you do not ever want to surrender, you should not rush to filing for bankruptcy. If you file now, you will eventually lose that property using a Chapter 7 bankruptcy. However, if you wait, you can have the time to put your property up for sale and even use the money.

4. New Debts – If you expect that you will be having new debts, it is a good idea that you hold off your decision to file for bankruptcy first. According to the rules of Chapter 7, your debts will only be erased if you have them on or before you file for bankruptcy. In this case, if you have future expenses and debts, you will have to deal with them yourself.

5. Stop Collections – Almost everyone file for bankruptcy to end the nonstop phone calls they receive about their debts. Bankruptcy filing can indeed stop the collections but there is actually another way. This is called the Fair Debt Collection Practices Act, which states that the collection agencies and the creditors should stop calling you if you ask them to.

6. Tax Refund - For instance, if you are expecting a refund on your taxes of around $4,000, you need to surrender the amount to the bankruptcy trustee after you file for bankruptcy. However, if you get the refund and spend it on a few of your necessities then declare bankruptcy, it is clear that you have the full benefit of the tax reimbursement.

If you are still confused whether you should file a credit card bankruptcy now or later, you can always speak to an experienced attorney. He or she can help you sort out your available options and weigh your current situation to help you make a good decision.