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Credit Card Debt and Bankruptcy in Columbus

Credit Card Debt and Bankruptcy in Columbus

What Happens to Credit Card Debt When Filing for Bankruptcy in Columbus?

Filing for bankruptcy can be an important decision, particularly for individuals struggling with credit card debt in Columbus. Understanding the implications of bankruptcy on credit card debt is essential for anyone considering this path, as it can provide a fresh start while also influencing future credit opportunities. In this article, we will explore what happens to credit card debt when filing for bankruptcy in Columbus and what you should keep in mind during this process.

As of October 2024, a total of 11,403 bankruptcies were filed in Ohio, including 8,970 Chapter 7 bankruptcies and 2,387 Chapter 13 bankruptcies. [1]

Understanding Credit Card Debt

Credit card debt generally refers to the total outstanding balances that borrowers carry from one month to the next. This form of debt can be beneficial for those looking to make purchases while delaying payment. However, credit card debt comes with some of the highest interest rates in the financial sector. Fortunately, borrowers have the opportunity to pay off their balances each month, which can help them avoid accruing interest over time. [2]

High credit card balances relative to your credit limit can lower your credit score, making it difficult to secure loans or favorable interest rates in the future.

Understanding Credit Card Debt

Chapter 7 Bankruptcy and Credit Card Debt in Columbus, Ohio

Chapter 7 bankruptcy is a form of bankruptcy that allows you to eliminate most of your unsecured debts or dischargeable debts, including credit card debt. If you’re struggling with overwhelming credit card bills in Columbus, Ohio, filing Chapter 7 bankruptcy can help you regain financial stability.

How Chapter 7 Bankruptcy Affects Credit Card Debt

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” is designed for individuals who cannot repay their debts. During this process, a bankruptcy trustee is appointed to oversee your case, sell non-exempt assets, and distribute the proceeds to creditors.

However, many personal assets may be exempt under Ohio law, allowing individuals to retain essential property. Chapter 7 bankruptcy influences your credit card debt in the following ways:

How Chapter 7 Bankruptcy Affects Credit Card Debt

Chapter 13 Bankruptcy and Credit Card Debt in Columbus, Ohio

Chapter 13 bankruptcy allows individuals with regular income to reorganize and repay their debts over a specified period, usually a three to five-year payment plan. If you’re facing mounting debt in Columbus, Ohio, Chapter 13 could be a viable option for regaining control of your financial situation.

How Chapter 13 Bankruptcy Affects Credit Card Debt

Chapter 13 is one of the types of bankruptcy often referred to as “reorganization bankruptcy.” It provides a way for individuals to consolidate their debts into a single monthly payment. Unlike Chapter 7, which may lead to the discharge of debts, Chapter 13 requires a repayment plan that outlines how debts will be paid off over time. 

Chapter 13 bankruptcy affects your credit card debt in the following ways:

How Chapter 13 Bankruptcy Affects Credit Card Debt

Effects of Bankruptcy on Credit Score in Columbus, Ohio

Bankruptcy can significantly impact your credit score, and the effects are generally similar across the United States, including Columbus, Ohio. Here’s a breakdown of how bankruptcy affects credit scores and what you can expect:

Immediate Effects on Credit Score

Long-Term Effects

Is it Possible to Keep Credit Cards When You File bankruptcy in Columbus?

In Columbus, existing credit card debts are typically discharged in a Chapter 7 bankruptcy, meaning the borrower is no longer responsible for repaying those debts.

However, if you wish to keep a credit card during bankruptcy, it’s essential to understand your options. You may choose to retain a credit card with a zero balance. This way, you can maintain the account without incurring additional debts. Alternatively, you can request the credit card company to reaffirm the debt. Reaffirmation involves agreeing to continue repaying the debt, which allows you to keep the credit card, but it also means you remain liable for that debt post-bankruptcy.

Is it Possible to Keep Credit Cards When You File bankruptcy in Columbus?

Contact the Richard West Law Firm to schedule a free consultation with Richard West, a board-certified Ohio bankruptcy lawyer, regarding your Columbus bankruptcy options and credit card debt.

Sources:

[1] Court Statistics | Northern District of Ohio | United States Bankruptcy Court. (n.d.). https://www.ohnb.uscourts.gov/court-info/court-stats

[2] Kagan, J. (2021, December 1). Credit Card Debt: What It Is, How It Works. Investopedia. https://www.investopedia.com/terms/c/credit-card-debt.asp

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Useful Calculators

Here are two helpful calculators for managing your debt repayments and Chapter 13 commitments.