Credit Card Debt and Bankruptcy
Credit card debt is one type of debt that can typically be discharged when you file for bankruptcy. However, you are not allowed to file for bankruptcy on credit card debt alone while leaving your other types of debt out of the bankruptcy. If you file for bankruptcy, you are legally obligated to report all debts from all sources. The court will then decide which debts will be discharged and which will not.
Bankruptcy and Debts
When you file bankruptcy, you will be required to make a list of all debts you owe to all creditors. Some of them will be able to be discharged by the bankruptcy and others will not. Debts that typically are not discharged include student loans, taxes, child support payments, alimony payments, court-ordered fines for drunk driving offenses, and some other types of fines. Most credit card related debt will be discharged, although there are a few exceptions. Exceptions include debt that is ruled by the court as nondischargeable and credit card debt that is secured.
Unsecured and Secured Debt
Most types of credit card debt are unsecured. This means that there is no lien on the items that you purchased with the credit card. These debts are typically discharged in a chapter 7 bankruptcy, but a chapter 13 bankruptcy may require you to pay at least part of what you owe. A secured credit card, on the other hand, may allow creditors to have a lien on whatever items you purchased. If that is the case, your creditor may repossess the items even if you file for bankruptcy.
Complaints of Nondischargeability
If your creditors believe that you used your credit card knowing that you planned to file for bankruptcy, they can file a nondischargeability complaint with the court. The court will then examine the complaint and make a ruling. If they determine that the debt is nondischargeable, you will have to pay the debt despite filing for bankruptcy. Using a credit card with the intent of filing bankruptcy is considered fraud.
Resolving Issues of Dischargeability
In 2016, it was determined that fraud occurred if a person took out more than $950 on a credit card within 70 days prior to filing for bankruptcy, or if you purchased more than $675 worth of luxury items within the 90 days preceding filing for bankruptcy. Even if you did not actually intend to commit fraud, the court will likely find that you did. The debt will be considered nondischargeable unless you can provide convincing evidence to the court that you were not planning to file for bankruptcy and you did intend to repay the debt.
Contact an Experienced Bankruptcy Attorney Today
If you are facing extensive credit card debt, an experienced bankruptcy attorney can review your situation and help you determine what your best course of action would be to get back on your feet financially. The attorneys at Cornwell Law Firm will take the time to listen to your financial goals and help you get back on track. We will review your debts and help you determine which ones are likely to be secured and unsecured and take the appropriate steps to ensure the best possible outcome. Contact us today to schedule a consultation.