By Sean A. Kelly
Credit card debts are indeed very risky for you to be carrying around without actually making any payments. As credit cards can be very addictive, you might even keep accumulating new debts with more interest on top of the existing credit card debts that you have not even paid for yet. Normally if you stopped making payments to your credit card companies for more than a few months (usually up to 6 months or 180 days), your creditors might actually write you off as a bad debt. It is considered as an expected cost of doing business from the point of view of your creditors but from your point of view, the charge-off appears on your credit report and might actually decrease your credit scores significantly. It may not be as severe as bankruptcy filing but the impact on your overall credit history may be quite major as it shows that as a debtor you have not been making any attempts to make payments to your creditors.
Sometimes, you may have the option to stop making your credit card payments altogether and wait for your bank to issue you a charge-off or you could opt for bankruptcy filing in order to have your debts discharged or modified. You might want to bear in mind though that when your creditors write off your debt as bad debt, they are not totally letting you off the hook by giving up on you paying your debt. They are merely giving up on your paying your debts voluntarily. So, although you probably think that a charge-off might be better than having to file for bankruptcy, you have to remember that any negative notation will stay on your credit report for seven years. So you probably might want to rethink your options and if it comes down to choosing between bankruptcy and credit card debt charge-off you might want to thoroughly weigh your options and go through all the pros and cons of each option.
In general, if your credit card debt is high, a bankruptcy may protect you from a lawsuit and prevent charge-offs from occurring, with the court allowing you to pay off your debts with a lower interest rate and sometimes a waiver of fees. Of course, the damage that the credit card debt charge-off might cause to your credit rating is not as severe as that of a bankruptcy filing. Yet, it will still stay on your credit report for years and might be the reason you may find it difficult to apply for a new loan in the future, as potential lenders will run a background credit check on you and see that you have a record of debt charge-offs.
If you opt to file for bankruptcy, when the debt is discharged by the court, you will no longer be held responsible for the debts you originally owed your creditors. However, if you choose to simply stay dormant while waiting for your bank to issue a charge-off, you are merely taking the chance that your creditors will not file a suit against you. Regardless of whether your creditor might win a judgment against you or otherwise, the charge-off will no doubt be reflected in your credit score for at least seven years.
Either way, you may want to consider and weigh the risks of each option thoroughly. You will have to bear in mind that a bankruptcy court takes all your debts into consideration, even the ones that you are not having any problem with. In the end it might come to choosing between risking a creditor lawsuit and a judgment and risking losing your assets such as your home or car.
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