Credit Card Debt

Bankruptcy Attorney Sina Maghsoudi helps people in Torrance, San Pedro, and throughout Southern California liberate themselves from overwhelming credit card debt through the relief offered by Chapter 7 or Chapter 13 bankruptcy.

According to a report by the Consumer Federation of America, the average household has about a dozen credit cards. Over half of these cardholders carry a balance from month to month, and the average balance is more than $10,000. The report also found that credit card companies actively market to people who are most likely to charge up big balances and least likely to be able to pay them off, such as students and low-income individuals. Meanwhile, credit cards become more numerous and easy to obtain, and interest rates continue to climb to record highs.

In the vast majority of consumer bankruptcy cases, the debtor is carrying some amount of credit card debt. Overcharging may not be the sole cause of a bankruptcy, but it often goes hand in hand with job loss, medical problems, or other financial catastrophes. A discharge of credit card debt is an important component of a vast number of bankruptcies.

In most instances, credit cards are issued without requiring any collateral or security for the money being loaned on credit. In a bankruptcy, therefore, credit card issuers stand in the shoes of unsecured creditors. They are able to participate in a share of the proceeds from a Chapter 7 liquidation, but any remaining balance will be discharged by the bankruptcy court. In a “no asset” bankruptcy, the entire balance may be discharged.

Make Sure it is Unsecured

It should be noted that not all credit card debt is unsecured. It is possible to obtain a secured credit card, where the consumer makes a cash deposit in exchange for the card. These cards are often obtained by people who cannot readily obtain “regular” credit cards. In fact, secured credit cards are often used as a tool for rebuilding credit by people who have gone through bankruptcy and find it difficult to obtain credit through conventional means. Obviously, a credit card debt based on a secured credit card may not be dischargeable in bankruptcy, and the card issuer may legally act to recover the collateral or security put up for the card.

Rebuilding Credit

One effect of the bankruptcy discharge will almost certainly be the cancellation of your credit cards. The credit counseling required as part of a Chapter 7 or Chapter 13 bankruptcy may help you with your budgeting and financial planning. For more information or for immediate assistance, contact Sina Maghsoudi for a free consultation.