Personal Bankruptcy Credit Card Debt
If you're saddled with credit card debt, you already know how overwhelming it can feel – the stress of worrying about payments, late fees, interest rates and where the money will come from can damage your quality of life.
Luckily, if you're beginning to feel that your credit card debt is out of control, you may be able to find relief by filing for personal bankruptcy.
To speak with a bankruptcy lawyer about your personal bankruptcy options, please fill out this form. We can connect you with an attorney in your area today for a free, no-obligation initial consultation.
Credit Card Debt & Personal Bankruptcy Options
There are two common types of personal bankruptcy protection, and both can provide relief from serious credit card debt. Here's a look at how each type works.
- Chapter 13 bankruptcy: This type of personal bankruptcy tends to work well for people who have a steady source of income and/or want to hang onto a home, car or other valuables. It involves setting up a three- to five-year repayment plan in which filers can catch up on their overdue debts while staying current on other debts. Chapter 13 is sometimes called "reorganization" because it allows people to reorganize their debts and pay off those that the court considers most important. At the end of the repayment period, if you've made all your payments as scheduled, the court may discharge any remaining unsecured, non-priority debt.
- Chapter 7 bankruptcy: This type of personal bankruptcy tends to work well for filers who have more limited incomes and/or have few valuable assets. Chapter 7 is sometimes called "liquidation" because it involves liquidating (that is, converting to cash in a sale) any non-exempt property a filer has and using the money raised to repay creditors. Many Chapter 7 filers don't have much or any non-exempt property, though. Chapter 7 also offers a complete discharge of some or all of a filer's unsecured debts (which typically includes credit card debt).
Will Personal Bankruptcy Relieve Your Credit Card Debt?
Most personal bankruptcy cases (either Chapter 7 or Chapter 13) allow successful filers to eliminate some or all of their credit card debt and get a fresh financial start on life. But there are some types of credit card debt that the bankruptcy court cannot discharge. These include:
- Fraudulent applications: If some aspect of your credit card application was fraudulent (that is, if it intentionally reported false information), the bankruptcy court may refuse to discharge your credit card debt.
- Use without intent to repay: If you use your credit card with the intention of discharging the debt in a bankruptcy filing, the court may also refuse to discharge your debt. Clearly, this is not a black-and-white matter, and in order for the court to refuse a discharge, your creditor would have to contest it and provide evidence that you used the card in such a way that it would be reasonable to assume you did not intend to repay your debts (such as using it to pay for vacations right before your filing, using it more right before your filing, etc.).
- Use for purchase of luxury goods or cash advances: This one, too, is all about timing. If you used your credit card to purchase luxury goods or services or to take out significant cash advances shortly before you filed your petition, the court may rule not to discharge those particular debts.