Credit cards can become an essential life tool — they pay the bills when you don’t have cash readily available, and they give you peace of mind when you’ve expended your emergency savings. But if you fall behind on the credit card’s minimum payments — that’s when you start to face the downsides of credit cards. If your credit card debt has gotten out of control and you can no longer make payments, you may be facing two options: default on your credit card debt or file bankruptcy.

What does it mean to default on a credit card?

When you sign up for a credit card, you sign an agreement to make on-time payments that are equal to or more than the minimum payment listed on your monthly statement. When you are unable to make these minimum payments for consecutive months, the banks may assume that you are not going to make any future payments. This is when your credit card is considered in default.

What happens after you are declared in default?

Once you default on your credit card debt, your credit card company can begin taking action against you to get the debt settled, including:

  • Selling your case to debt collectors resulting in phone calls, emails, etc.
  • Taking legal action against you in court
  • Garnishing your wages for the remaining balance
  • Increasing interest rates, thus increasing the debt

Should I default on my credit card or file for bankruptcy?

If you have not defaulted yet, it’s always best to keep trying to make the payments until you are officially in default. However, if you are already declared default, then it’s important to remember that simply ignoring your credit card debt does not make the responsibility go away. Instead, filing for bankruptcy could be your best option for financial success in the future.

Filing for either Chapter 7 or Chapter 13 bankruptcy results in an automatic stay, which will stop any debt collection actions from creditors, including an immediate stop to wage garnishment. In Chapter 7 bankruptcy, you can have your credit card debt discharged, while Chapter 13 bankruptcy gives you the chance to make more manageable payments on your debts.

Let Us Help You Make a Decision

While walking away from your debts may sound like the easiest option, this option may hurt you in the long run. Barbara B. Braziel is experienced in wiping out credit card debt through Chapter 7 or Chapter 13 bankruptcy. Whether you have already been considered in default or you know you will be contacted soon for defaulting, contact us today to schedule a free consultation. We will advise you on the next best steps for a fresh start in your finances.

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