When used wisely, credit cards and home loans are an important financial tool. However, they can also be the source of significant debt problems. If you’re struggling to meet your credit card and mortgage obligations each month, you might be faced with the difficult task of choosing one to pay over the other. Before making that decision, it’s beneficial to carefully consider bankruptcy and how it can help you manage each type of debt.  

Credit Cards 

Credit card debt falls into the category of unsecured, which means it’s eligible to be discharged through bankruptcy. If you file and complete a Chapter 7 bankruptcy, the credit card debt will be fully eliminated, and you will no longer owe creditors any amount.

Should you opt to file a Chapter 13 bankruptcy instead, the debt will be reorganized into an affordable payment plan. This will include a portion of the unsecured debt, such as credit cards, and you will only have to make payments for three to five years, after which anything you still owe will be written off. 

Mortgage

Mortgage loans are secured debt, so they don’t qualify to be discharged in a bankruptcy. Therefore, whether you file a Chapter 7 or 13 bankruptcy, you must still pay the remaining balance on the loan and any arrears you might owe. Considering this, it’s typically best to continue paying a mortgage debt over credit card bills, so you don’t risk the possibility of foreclosure. Filing bankruptcy might still help if you’re having trouble making mortgage payments, as you will be given the opportunity to reaffirm the loan debt in a Chapter 7 or include a delinquent loan in a Chapter 13 bankruptcy plan. 

If you are unable to fulfill both your credit card and mortgage responsibilities, declaring bankruptcy might be the answer to help alleviate your financial burden. Harry B. Zornow in Hamilton, OH, will thoroughly review your debts to determine if this option is right for your particular situation. Call his office at (513) 737-9770 to schedule a consultation today, or visit his website to learn more about his practice areas.