Does Filing Chapter 7 Bankruptcy Get Rid of Credit Card Debt?
Credit card debt is one of the most common reasons for filing bankruptcy.
Most credit card debts can be “discharged” (wiped out) through Chapter 7, which means you will not owe them once you complete your bankruptcy.
Keep in mind that to file Chapter 7 bankruptcy you must “qualify”. You must have little or no disposable income in order to file Chapter 7 bankruptcy. If you make too much money, the Bankruptcy Judge will require you to file Chapter 13 Bankruptcy instead.
If your Chapter 7 bankruptcy is a “no asset case” – which means that there you have no property that can be sold to pay creditors – the credit card debt is simply wiped out. This is the case in the vast majority of Chapter 7 Bankruptcies.
If you do have any assets that can be sold, the credit card company will be paid out of the proceeds of the sale on a pro-rated basis along with other creditors – but only after any “secured” debts are paid. Only certain assets can be sold to pay your debts.
Credit Card Debts NOT Discharged in Chapter 7:
1.) Fraud & Credit Card Debt in Bankruptcy
There are some exceptions to being able to wipe out credit card debts in Chapter 7 bankruptcy. If the court determines that your credit card charges were incurred through “fraud, misrepresentation, or false pretenses” the judge may NOT wipe them out.
2.) Credit Card Debt for Luxury Goods in Bankruptcy
If you used a single credit card to buy more than $650 worth of “luxury goods or services” within the 90 days before for bankruptcy, the debt will not be wiped out in Chapter 7. “Luxury goods or services” might be boats, expensive jewelry, exotic vacations or anything that is to “not reasonably necessary for the day to day support or maintenance of you or your family.
3.) Credit Card Debt for Cash Advances in Bankruptcy
If you use your credit card to take out more than $925 in cash advances in the 70 days before filing Chapter 7 bankruptcy, the debt will not be wiped out.
4.) Challenges by Credit Card Company
A credit card company can “challenge” the discharge of a debt in Chapter 7 bankruptcy by filing a complaint with the bankruptcy court. The deadline for the creditor to file a complaint challenging the discharge of a credit card debt is 60 days after the first meeting of creditors. If a creditor files a complaint, your attorney must file a timely answer if you want to dispute the creditor’s claim.
Southfield’s Best Chapter 7 Bankruptcy Attorneys
Our bankruptcy attorneys have helped hundreds of individuals in the Southfield area, and across the greater Wayne County & Oakland County area wipe out their credit card debt by filing Chapter 7 bankruptcy. Call our experienced bankruptcy attorneys today for a FREE CONSULTATION to see if filing Chapter 7 is right for you!