Bankruptcy is a final option when settling old debts. It should only be employed after every other option has been exhausted—including credit card negotiations. Bankruptcy can remain on your credit report for ten full years. This means you may have to wait years before most lenders will consider you for a new line of credit.
Your home should be protected
Typically, your home will be protected when you file for bankruptcy under Chapter 7 Bankruptcy laws. If you can make your mortgage payments and are comfortable living with little to no extra credit in the coming years, it may be the option you are looking for.
Employers may equate bankruptcy with instability
However, if you intend to relocate or seek new employment, bankruptcy can hurt you in unusual ways. Many people are unaware that employers will consult a person’s credit report while making a determination of fitness for a new position—bankruptcy can take you out of the race. A bankruptcy can be an eyesore on your credit report, and could compromise your financial stability.
You must be delinquent to file for bankruptcy
You will not qualify for bankruptcy proceedings until you are 90-days delinquent. Even if you have huge credit card debts, the 90-day mark is the high-water mark for beginning any kind of negotiations over your credit card debt. You will simply have to wait it out and reorganize your finances if you expect to be financially insolvent in the months to come.
Remember, too, that in credit card a negotiation, rarely—if ever—is there a cheap way out of your debt. Don’t make the mistake of consulting a late-night television debt-settlement service that claims it can settle your debt for pennies on the dollar.