Resources, Advice & Tips for Covid-19
Read More

Should You File Bankruptcy When You Have Huge Credit Card Bills?

Allison Martin
Couple calculating home finances

The thought of filing for bankruptcy can be frightening. However, if you're overwhelmed by huge credit card bills, it may be worth considering. Before deciding if it's right for you, weigh your options and understand the benefits and drawbacks to ensure you make the best decision for your situation.

Chapter 7 vs. Chapter 13 Bankruptcy

There are two types of bankruptcies that could alleviate the pressures associated with excessive credit card debt: Chapter 13 and Chapter 7.

  • Chapter 13 bankruptcy is essentially a court-approved reorganization plan that enables you to pay back outstanding debt over a three to five year period.
  • Chapter 7 bankruptcy is different. According to Investopedia, "When an individual files a Chapter 7 Bankruptcy, most of his debts are discharged," including credit cards.

Bankruptcy Benefits

There are a few benefits to filing for bankruptcy when you have huge credit card bills.

Stops Collection Activities

Are you tired of receiving collection letters or calls from your creditors? Once you file bankruptcy, they are legally required to back off until you sort things out in court. If you qualify under Chapter 7, no further collection action can be taken.

However, filing under Chapter 13 will require you to make monthly payments equivalent to the greater of the amount the creditors would have received through Chapter 7 proceedings or your excess monthly income, notes

Balances Can Be Discharged

Assuming you qualify under Chapter 7, your credit card debts can be eliminated through a discharge. However, keep in mind that you'll have to prove that you don't have the wherewithal to pay and establish that doing so would prohibit you from covering everyday living expenses.

Stress Reliever

If you find yourself constantly worrying about credit card bills, filing for bankruptcy could alleviate a ton of pressure. It can also improve your mental health since you'll be able to journey through your day and sleep peacefully knowing that you've taken measures to begin resolving the issue.


Unfortunately, there are also drawbacks to filing for bankruptcy to eradicate large credit card bills.

Impact on Credit Rating

According to myFICO, bankruptcies stay on your credit report for seven to ten years. They also tarnish your credit score and could make it extremely difficult to qualify for other debt products.

Legal Fees

While it's possible to file for bankruptcy without an attorney, it may not be in your best interest to do so. You'll want a seasoned and reputable bankruptcy attorney in your corner to ensure that all the paperwork is completed and filed correctly so your case has a fair chance of holding up in court.

However, you should be prepared to fork over a nice sum of cash to cover legal fees. According to, "A Chapter 7 can run $1,500 to $2,500, while a Chapter 13 can run $2,000 to $4,000."

Public Records

Unfortunately, information on your bankruptcy proceedings will be available for the world to see. Bankruptcy filings are public records that can be accessed by anyone who is willing to dig through the county clerk's website or files. "The world, if they're interested, can see everything about your financial situation in the last few years," says

Is Bankruptcy Right for You?

NerdWallet recommends that you consider bankruptcy if you meet any of the following criteria:

  • Your total outstanding debts are greater than 50 percent of your annual income

  • You'd be paying on debt for more than five years, despite aggressive repayment efforts

  • Your debt is causing physical and mental stress

Ultimately, no one but you can determine if bankruptcy is right for you. Be sure to should seek legal advice from a bankruptcy attorney before making a firm decision.

Continuing to Make Credit Card Payments

It's natural to wonder if you should continue to make credit card payments if you are considering bankruptcy. The choice is yours, but you could very well be wasting your money if you're planning to file for bankruptcy in the near future. However, notes, you should "be aware that if you don't plan to file your case for a long time, stopping your payments can prompt the credit card company to file a lawsuit against you to recover its debt."

Should You File Bankruptcy When You Have Huge Credit Card Bills?