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What options do I have to avoid bankruptcy with credit card debt?

If you're struggling with credit card debt, you may be able to avoid bankruptcy through a debt management plan, the debt snowball method, or careful budgeting. Cambridge Credit Counseling offers a free debt analysis to help you see which option fits your situation, and if bankruptcy still becomes necessary, Cambridge Credit Counseling is approved to provide the required counseling courses.

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Start With a Free Debt Analysis#

Cambridge Credit Counseling provides consumers with a free, one-on-one debt analysis to help determine the most appropriate course of action for their financial situation. To find out whether a debt management plan is a good fit, consumers work with one of Cambridge Credit Counseling’s nationally certified credit counselors during this session.

Debt Management Plans Through Credit Counseling#

A debt management plan set up through Cambridge Credit Counseling is one option for handling credit card debt without filing bankruptcy. Establishing a debt management plan with us may adversely affect your credit, though the effect may be temporary as you remain committed to making monthly payments through your Debt Management Plan. If you stop paying your debt, creditors may increase finance and other charges or take collection action, including litigation. This is an important tradeoff to understand before enrolling.

The Debt Snowball Method#

The debt snowball method pays off credit cards or loans by putting more than the minimum payment toward the debt with the lowest balance first while paying only the minimum on the rest, then repeating with the next lowest balance until all debts are paid. This is a do-it-yourself approach some people use before considering other options.

Be Careful With Home Equity Loans#

Using home equity to pay off credit card debt converts unsecured debt into debt secured by your home, which puts your home at risk. Before turning to this option, it’s worth weighing whether trading unsecured debt for a debt secured by your house makes sense for your situation.

Know What Happens If You Fall Behind#

Creditors have a legal obligation to charge off accounts that reach a certain number of days past due. Credit card accounts not on a repayment plan are required to be put into charge-off status at 180 days past due, while personal loans and credit card accounts on a workout plan charge off after 120 days of delinquency. Understanding these timelines can help you see how urgent your situation is before deciding on next steps.

If Bankruptcy Becomes Necessary#

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, people who plan to file for bankruptcy protection must, with limited exceptions, receive credit counseling from a government-approved organization within 180 days before filing, and they must complete a debtor education course to have their debts discharged. Consumers filing bankruptcy must complete both a pre-filing credit counseling course and a post-filing debtor education course to receive the certificate needed to file and complete a bankruptcy petition.

Cambridge Credit Counseling’s Role in the Bankruptcy Process#

Cambridge Credit Counseling is approved by the U.S. Department of Justice Executive Office of United States Trustees to administer a pre-filing credit counseling course and a post-filing debtor education course, both of which are available online. Bankruptcy counseling and debtor education each cost $50.00 per household per session and are available free or at a reduced rate based on ability to pay. The fee is per household, not per person, so a married couple filing together pays once. Households with income below 150 percent of the federal poverty guidelines for their household size are presumed eligible for a fee waiver. Households above that line may still qualify for a reduced fee if they can show a temporary financial hardship, such as a recent job loss or drop in income, unexpected medical costs, disability, separation or divorce, the death of a household wage earner, or another documented financial circumstance that significantly impacts the household’s ability to pay. Waivers and reductions are assessed on the household’s current income, expenses and overall financial condition, and Cambridge Credit Counseling will not refuse services to anyone due to inability to pay. We do not report participation in these courses or pull the consumer’s credit report to provide them, so taking these courses has no effect on the consumer’s credit rating.

Approval by the U.S. Department of Justice Executive Office of United States Trustees does not endorse or assure the quality of our services.

What to Do Next#

Whether you’re trying to avoid bankruptcy or need to complete required courses because you’re filing, Cambridge Credit Counseling can help. Start with the free, one-on-one debt analysis to review your options, including a debt management plan, before deciding on next steps.

Common questions

Will a debt management plan through Cambridge Credit Counseling hurt my credit score?

A Cambridge Credit Counseling debt management plan may adversely affect your credit, though the effect may be temporary as you remain committed to making monthly payments through your Debt Management Plan. It's an important factor to weigh against the benefits of a structured repayment plan.

What is the debt snowball method?

The debt snowball method pays off credit cards or loans by putting more than the minimum payment toward the debt with the lowest balance first while paying only the minimum on the rest, then repeating with the next lowest balance until all debts are paid.

Do I have to take a course before filing bankruptcy?

Yes. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, people who plan to file for bankruptcy must receive credit counseling from a government-approved organization within 180 days before filing and complete a debtor education course to have their debts discharged.

Will Cambridge Credit Counseling's bankruptcy courses show up on my credit report?

No. Cambridge Credit Counseling does not report participation in its bankruptcy counseling or debtor education courses and does not pull the consumer's credit report to provide these services, so the services have no effect on the consumer's credit rating.

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