You owe $50,000 in credit card debt. Interest rates are over 25%. Even while making minimum monthly payments, your balances keep rising—some at nearly 28%. You’re barely managing to keep up with your mortgage. You’ve borrowed from family and don’t know how you’ll pay them back. You’re unsure if you can afford summer camp for your kids. You’re considering raiding your retirement savings just to get by.

You often imagine what life would be like without the weight of credit card debt. You’d be able to cover your expenses, start saving, and watch your retirement plan grow. You wouldn’t have to worry whether your credit card will be declined at the supermarket.

The Debt Relief Options You’ve Heard About

There are ways to tackle credit card debt:

• Debt Settlement—You can negotiate with creditors to settle your debts for less than you owe or arrange a new payment plan.
• Debt Management Plans—These programs consolidate your payments and reduce interest rates through nonprofit credit counseling agencies.

While these options can ease the burden, they still require full or partial repayment of the debt. Worse, if you settle for less than you owe, the forgiven portion is often treated as taxable income, creating a new liability you may not be prepared for.

The Option You Haven’t Seriously Considered: Bankruptcy

Under Chapter 7 bankruptcy, unsecured debts like credit card debt are discharged entirely, without any tax consequences and with no obligation to repay.

So why isn’t bankruptcy recommended more often?

We’re told it should be a “last resort.” But that mindset can be costly. If you deplete your retirement savings or borrow from your home equity to pay off unsecured debt, and then end up filing bankruptcy later anyway, that money is lost—and protected funds are gone.

Most retirement accounts are shielded in bankruptcy. So are significant portions of home equity. For example, in many counties in New York, the homestead exemption is just under $180,000 per individual or nearly $360,000 for a married couple. If you’re married and your house is worth $800,000 and you owe $500,000 on the mortgage, you can keep your home and still discharge your unsecured debts.

Common Bankruptcy Myths—Debunked

• “It will ruin my credit.”

If you’re behind on payments, your credit may already be severely damaged. Bankruptcy causes an immediate dip in your credit score, but it also allows you to start rebuilding right away. You can get a secured credit card soon after filing, and with responsible use, your credit can recover within a few years.

• “It stays on my record for 10 years.”

This is true—but the question is how that actually affects your life. Employers generally cannot deny you a job based on bankruptcy. In comparison to someone who has missed payments and is currently in debt, many lenders see someone who has filed for bankruptcy as less risky, because they can’t file again for eight years.

• “I’ll lose my house or car.”

Not necessarily. As mentioned, state exemptions often allow you to keep your home, car and retirement accounts. It depends on your specific situation and the laws in your state.

• “It’s unethical.”

The concept of debt forgiveness isn’t new. In fact, the Torah introduces the principle of debt release every seven years—shemitah. U.S. bankruptcy law is modeled after this cycle and is even mentioned in the Constitution. Choosing to provide for your family’s future and stability is not unethical—it’s responsible.

Bankruptcy Isn’t Failure. It’s a Fresh Start.

Bankruptcy isn’t a free pass, nor is it a license for irresponsibility. But when life throws challenges beyond your control, it can be a vital tool to protect your family, your home and your future.

Don’t let stigma or fear stop you from exploring the best path forward. If you’re overwhelmed by credit card debt and see no way out, bankruptcy may offer the clean slate you need to truly rebuild.

David Siegel is a longtime Teaneck resident with over 40 years of experience in the financial industry, serving as a financial adviser, mortgage loan originator and bankruptcy attorney. While he continues to assist homeowners with both purchases and refinances as a licensed mortgage loan originator, David has also returned to the legal field to help clients navigate debt-related challenges. In an era of record-high credit card debt and growing financial strain, David is committed to supporting members of the community—not only in securing home financing but also in managing debt for a more stable and comfortable life. David can be reached at DJs.siegel@gmail.com.