Do you have credit card debt spiraling out of control because of high interest rates, late fees, and aggressive collection tactics? Tacoma residents facing overwhelming debt have several options to help manage or even eliminate it.
The statute of limitations determines how long a creditor has to sue you for unpaid debts. In Washington, the statute of limitations on written contracts, including credit card agreements, is six years (RCW 4.16.040).
After this time, your creditors can no longer take legal action against you to collect the debt. However, the clock can restart if you then make a payment or acknowledge the debt.
Wage Garnishment and Bank LeviesIf your creditor sues you and wins a judgment against you, they can start garnishing your wages or levy your bank account. In the state of Washington:
A Tacoma bankruptcy attorney can help you stop wage garnishment through bankruptcy or negotiations.
How to Handle Credit Card Debt in TacomaDebt ConsolidationThis process involves combining multiple debts into just one loan with a lower interest rate. A few of the more common ways to consolidate debt include:
This involves negotiating with your creditors to pay a reduced amount. While this can negatively impact your credit score, it can help if you’re struggling to make payments.
Credit counseling and debt management plans involve working with a nonprofit agency to develop a feasible repayment plan. They can help you organize your payments and negotiate for lower interest rates.
If your debt is unmanageable and the other debt relief options are insufficient, bankruptcy may offer the relief you need.
How Bankruptcy Can Help in Pierce CountyYour Tacoma bankruptcy attorney in Pierce County can help determine whether filing for bankruptcy is the right option for your situation. Here is how it can provide you with relief:
Chapter 7 BankruptcyChapter 7, known as a liquidation bankruptcy, is best for those with a limited income who can’t afford to repay their debts.
Chapter 13 or reorganization bankruptcy allows those with a steady income to create a repayment plan to pay debts over a certain timeframe.
Chapter 7 can discharge most of your credit card debt, while Chapter 13 requires a partial repayment but can reduce the total amount you owe.
If you ignore your credit card debt, it can lead to late fees, increased interest rates, lawsuits, wage garnishments, and damage to your credit score.
The amount of credit card debt that many consider “normal” is based on factors such as income, the cost of living, and one's financial habits. However, the average credit card balance per person in the US is around $6,000.
In Washington State, residents tend to have slightly higher-than-average credit card debt due to the state's high cost of living. Experts recommend keeping your credit utilization ratio (the amount of credit used versus your total credit limit) below 30% to maintain a healthy credit score.
Yes, you can. You can contact your credit card company directly and request a lower interest rate, a settlement, or a hardship plan.
If you have missed payments, high balances, and accounts in collections, all of this can significantly lower your credit score. Bankruptcy will also negatively impact your score, but can provide you with a fresh start.
If you are dealing with credit card debt in Tacoma, we know how overwhelming that can get. We are here to let you know that you still have options. Whether you choose to pursue debt consolidation, a settlement, or bankruptcy, knowing your rights under Washington law is important.
If bankruptcy is the right solution, consulting one of our Tacoma bankruptcy attorneys is a good first move. We can help you navigate the process and secure the fresh financial start you need.
Credit card debt can be totally eliminated in bankruptcy. It is part of a class of debt called “general unsecured debt”, which means it is last in line to be paid if creditors get anything in the bankruptcy. In most Chapter 7 cases, credit cards do not receive anything because no property is taken from the debtor to pay them. In Chapter 13 cases, they receive pennies on the dollar based on how much the debtor can afford to pay through the plan.
Some lenders will “cross collateralize” credit cards. That means they secure the credit card with a car or some other collateral. This is more common with credit unions. If you have a car loan or other kind of account with a lender and you took the credit card out later, you should make sure you did not cross collateralize the loan before you file bankruptcy. If so, you either have to pay off the credit card to keep the car or find some way of dealing with it through bankruptcy, such as a cram down in Chapter 13 or a redemption in Chapter 7.
Most credit card debt is totally unsecured. Even if payments are set up to come out of a bank account or come out of a pay check automatically, they can be totally wiped out. It does not matter if you are current with the payments, a year in default or in the middle of a garnishment; credit cards are almost always dischargeable.
To be excluded from the discharge, a credit card company has to prove that the debtor committed fraud when he or she made the charges. That means having to show that the debtor did not intend to pay back the charges, usually be showing that the charges were made in anticipation of bankruptcy. This is a hard case to prove, though there is a presumption of fraud if more than $500 was charged for luxuries or $750 in cash advances within 90 days of filing bankruptcy. The case is based the circumstances surrounding the charges, things like: how much they were, what kind of purchases, whether the debtor was in deep financial trouble already and whether any payments were made after the charges. A few minor charges for necessities usually do not draw any attention. The credit card company has to file an adversarial proceeding to prove fraud. This is an expensive and risky law suit and it is only worth while when there is a lot of money involved.
Contact the experienced bankruptcy lawyers in Tacoma, Washington for more information on wiping out your credit card debt.