Say Goodbye To Late Fees And Penalties When Filing For Bankruptcy

Filing for bankruptcy can indeed provide a pathway to eliminate late fees and penalties associated with credit cards and loans, offering a fresh start for those overwhelmed by debt. Both Chapter 7 and Chapter 13 bankruptcy have provisions that can help debtors address these financial burdens, but the specifics vary depending on the type of bankruptcy filed.

Chapter 7 Bankruptcy and Late Fees

Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, can discharge most unsecured debts, including credit card debt, personal loans, and the associated late fees and penalties. Here’s how it works:

1. Discharge of Debts: When you file for Chapter 7, most of your unsecured debts, along with any additional late fees and penalties, can be wiped out. This discharge means you are no longer legally obligated to pay these debts.
2. Automatic Stay: Upon filing, an automatic stay is immediately put into effect, halting creditors from pursuing further collection actions, including the accrual of additional late fees.
3. Non-Dischargeable Debts: It’s important to note that not all debts can be discharged in Chapter 7. Obligations like student loans, child support, alimony, and certain tax debts are typically not eliminated.

Chapter 13 Bankruptcy and Late Fees

Chapter 13 bankruptcy, known as a reorganization bankruptcy, doesn’t immediately discharge debts but rather restructures them into a manageable repayment plan. Here’s how late fees and penalties are treated:

1. Repayment Plan: In Chapter 13, your debts are consolidated into a repayment plan that lasts three to five years. While you may end up paying a portion of your unsecured debts through the plan, late fees and penalties that accrued before filing can often be reduced or eliminated.
2. Priority of Debts: Chapter 13 prioritizes certain debts over others. Generally, late fees and penalties on unsecured debts are considered non-priority and are less likely to be paid in full through the repayment plan.
3. Discharge at Completion: Upon successful completion of the Chapter 13 repayment plan, the remaining balances on most unsecured debts, including any remaining late fees and penalties, are typically discharged.

Considerations Before Filing for Bankruptcy

1. Long-Term Impact: Bankruptcy has a significant impact on your credit score and remains on your credit report for 7 to 10 years, affecting your ability to obtain future credit.
2. Legal and Filing Fees: There are costs associated with filing for bankruptcy, including attorney fees and court filing fees.
3. Asset Liquidation: In Chapter 7, you may risk losing some assets, although many types of assets are protected through exemptions.
4. Financial Management: Post-bankruptcy, it’s crucial to adopt sound financial habits to avoid falling back into debt.

Filing for bankruptcy can be a viable option to eliminate late fees and penalties on credit cards and loans, providing significant relief for those struggling with debt. However, the decision to file should be made with a comprehensive understanding of the implications and benefits. Consulting with a bankruptcy attorney can offer valuable insights and guidance, helping you make an informed decision based on your unique financial situation.

Late Fees & Penalties