Filing for Chapter 7 bankruptcy is a powerful and immediate solution to debt problems. The same day that you file, you have the protection of an automatic stay. Creditors will no longer be able to call you, and you won’t have to worry about a pending lawsuit brought by a creditor moving forward. If you discharge the debt that led to the lawsuit, they won’t be able to file again even after your bankruptcy proceedings.
Some people would rather look for alternate ways to manage their debts instead of filing for bankruptcy. Balance transfers are a popular option. Credit card companies and other lenders will offer tempting promotional interest rates so that you transfer the debt owed on another line of credit to a new line or one with a better interest rate.
Unfortunately, balance transfers aren’t nearly as helpful as resolving your debt problems as bankruptcy.
You still owe the debt despite moving it
If you discharge your debt in a Chapter 7 bankruptcy, you never have to worry about paying it back. If you transfer the balance from one credit card to a new account, you will still have to make monthly payments until you pay off the full balance and whatever interest accrues in the meantime.
Balance transfers can free up funds on one credit card and may lead to you overspending, making it easy for you to simply add to your debt instead of getting it under control.
You could face big financing charges
While there may be a promotional interest rate that applies at first, many lenders include a lot of fine print and balance transfer offers. If you don’t pay off the full balance before the promotional period ends, you can expect to get hit with a lot of interest all at once.
The interest won’t just start accruing when the promotional financing expires. Typically, the interest you owe will go back to the date that you first transferred the debt. You could end up owing far more than you do now if you rely on balance transfers as a short-term solution when your credit card debt is out of control.
Bankruptcy gets rid of the underlying debts when successful and therefore helps you resolve your credit card debt instead of just temporarily delaying your repayment obligations. Learning more about the basics of bankruptcy can help you decide the best approach to your current financial hardship.