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How to Get Rid of Credit Card Debt Through Bankruptcy

Posted By Allmand Law Firm, PLLC || 29-Aug-2016

Excessive debt is one of the major reasons why people file for bankruptcy. In many cases, the excessive debt is the result of paying for necessities such as medical bills and vehicle repairs. While there are some exceptions, most credit card debt can be discharged when a person successfully completes Chapter 13 or Chapter 7 bankruptcy.

Chapter 7 Bankruptcy and Credit Card Debt

When you file for Chapter 7, most of your debt can be discharged. However, Chapter 7 requires you to give up all of your non-exempt property. The trustee will sell the property and use the money to pay off creditors. Most credit card debt is viewed as non-priority, unsecured debt, so it's discharged with Chapter 7. Tax debts and child support are two examples of priority debts, which cannot be discharged with Chapter 7 bankruptcy.

Although it doesn't make sense in most situations, it's possible to file for Chapter 7 and reaffirm all debts except for credit card debt. In this situation, an individual is liable for reaffirmed debts when the bankruptcy is finished.

Chapter 13 Bankruptcy and Credit Card Debt

Depending on your situation, Chapter 13 bankruptcy might make sense. This type of bankruptcy involves partially or fully repaying some creditors. It involves a specialized payment plan, which might be anywhere from three to five years. In most cases, a portion of unsecured debt is paid with Chapter 13 bankruptcy. Credit cards are great examples of unsecured debt. When determining how much money you'll pay, several factors are considered. A major factor is the amount of disposable income you make. The majority of individuals who file for Chapter 13 bankruptcy must only pay a tiny percentage of their unsecured debt. When the repayment period is over, remaining credit card balances are discharged.

When Creditors Can Challenge the Discharge of Your Credit Card Debt

While the discharge process is usually the same for most people, there are some exceptions. If a person ends up with credit card debt because he or she engaged in fraudulent activities, the debt cannot be discharged. However, the creditor must challenge the debt discharge process. If the creditor is successful, the court will make the individual pay the credit card debt. Common Examples of Credit Card Fraud:

  • Making a false statement on a credit card application.
  • Charging over $650 with any creditor for luxury services or goods within 90 days before filing for bankruptcy. In this situation, it's presumed that your intent was fraudulent.
  • Getting a cash advance that totaled more than $925 within 70 days of filing for bankruptcy.

Although it's quite rare, some creditors take security interest in property. This information is usually disclosed in the agreement. In this situation, the credit card debt is actually secured.

Can I Be Sued After Bankruptcy?

No. One of the benefits of filing for bankruptcy is that it prevents creditors from taking you to court. It also prevents creditors from engaging in further collection attempts. After filing bankruptcy, the automatic stay prevents credit card companies from calling you, sending letters and engaging in similar activities.

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