No One Should Face
Crushing Debt Alone

Defaulting on credit cards may result in closure of accounts.

Depending on the card holder agreement, Florida residents may find their credit limits drastically reduced or their line of credit cancelled after a default on a different credit card account. No matter what the circumstances of the late payments, the credit card company may have the right to cancel a credit account — even if that account is in good standing — if the customer fails to pay on other accounts.

However, filing for bankruptcy may help the customer avoid being turned in to collections and give them a chance to pay off their credit card debt. In a bankruptcy, the debt is either discharged or a payment plan is made so the debtor can pay off their debt with reduced monthly payments, or the debt may be forgiven and no more money is owed to the credit card company.

Not all debts can be included in a bankruptcy, but the lower monthly payments will leave more room in the budget to fulfill other financial obligations. By reducing the amount of the money owed each month or eliminating some debt, consumers can afford their monthly bills and stay current on their bills.

There are two types of bankruptcy: Chapter 7 and Chapter 13. In a Chapter 7 case, the debt is wiped out, so the debtor has the money each month to pay bills and make payments on those debts that were not included in the bankruptcy. In a Chapter 13 case, the court will create a repayment plan to repay the money that is owed. This also protects the person who filed form criminal prosecution because they can not afford their debt.

Source: Fox Business, “Defaulting on Some Credit Cards Risks Losing Them All “, Elaine Pofeldt, June 18, 2013

FindLaw Network