Does Bankruptcy Clear Credit Card Debt?

Our new clients often ask us whether filing forbankruptcy will get rid of their credit card debt. In most cases, the bankruptcy court will discharge credit card debt in bankruptcy. In addition to medical bills, credit card debt is one of the leading causes of bankruptcy filings in the United States. The average American has approximately $7,000 in credit card debt. In a rough economy, carrying a high amount of credit card debt causes significant financial strain. 

Bankruptcy Courts Typically Discharge Credit Card Debt

Chapter 13 and Chapter 7 bankruptcy can discharge or wipe out your credit card debt. In a Chapter 7 bankruptcy, the bankruptcy court will wipe out most or all of your non-proprietary, unsecured debt. Most credit card debt falls into this category. In a Chapter 7 bankruptcy, the bankruptcy trustee will sell your non-exempt property and use the proceeds to pay off your creditors.

In a Chapter 13 bankruptcy, the bankruptcy court will help you create a repayment plan that will last between three and five years. During the repayment period, you will make monthly payments to pay off a portion of your unsecured debt, including credit card debt. The court will decide how much you pay your creditors based on your income and your non-exempt property value.

Credit Card Debt Charged Due to Fraud

Bankruptcy courts will wipe out most credit card debt, but there are few exceptions to the general rule. Creditors, do you have the right to challenge the discharge of your credit card debt on certain grounds, including fraud. If you fraudulently charged your credit cards, creditors can ask the court not to wipe out your credit card debt.

For example, if you made false claims on your credit card application and the claims were material to the credit towards the decision to give you a card, the court may not wipe out your debt. For example, if you lied and stated you have a higher income, the court will not discharge your credit card debt. 

Additionally, suppose you charged over $725 on a single credit card for a luxury service or good within 90 days of filing for bankruptcy. In that case, the court will presume that your intent was fraudulent and will not discharge that amount. Finally, if you secured a cash advance from one creditor for $1,000 within 70 days of filing for bankruptcy, the court will not discharge the debt. 

Secured Credit Card Debt

Bankruptcy courts will not discharge debt that is secured by collateral. Most credit cards are based on unsecured debt. However, in rare situations, a credit card company May secure your debt through collateral property such as furniture, mattresses, jewelry, or large appliances. You can check your contract to see whether your credit line is secured by collateral or not.

Contact a Los Angeles Bankruptcy Lawyer

Is your credit card debt becoming overwhelming? Are you stressed and anxious about your financial situation? If so, you would benefit from speaking to one of the experienced Los Angeles bankruptcy lawyers at Bankruptcy Law Center. Contact us today to schedule your initial consultation. 

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Roger C.

I reached out to BLC to help assist with a chapter 7 business bankruptcy and they provided excellent guidance, advice, and support through the entire process. In my case an adversarial action was filed by one of the creditors and attorney Ahren Tiller and his staff provided sound ...arguments which prevailed. Couldn’t have found a more experienced and supportive team to represent me in a tricky situation. I would highly recommend them to anyone making the difficult but sometime necessary decision to find financial relief. Read more
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Like many others before and during the pandemic, life happenings caused me to be in a financial situation to warrant bankruptcy. The BLC was super professional all the way through the entire process. Right after I paid for my Bankruptcy, I got sick and had to have surgery and recovery. Then we ...were in full Pandemic mode. They were gracious to delay my filing until I was recovered and ready to file. I could not ask for more. The process was over all quick and painless for a simple Bankruptcy like mine. I feel a weight has been lifted and I can rebuild. Thank you for all your arduous work and patience, Gabriel, Ahren, and their teams are knowledgeable and efficient. Read more
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I am very happy with my experience with BLC. Bankruptcy is not something anyone wants to go through, however everyone at BLC made my experience pleasant and easy. The process was explained thoroughly and I had an easy time reaching out and connecting with my attorney. Anika Renaud-Kim was my attorney ...and she was nothing short of amazing! She was very patient and generous with her time. Ms. Renaud-Kim definitely made me feel at ease and comfortable through the entire process. Read more
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When searching for information I had called a few different firms and received consults. BLC was the only one who didn’t shy away and provided answers and information during the consult. Once I agreed to move forward, they were supportive, informative, and eased my anxiety through the whole process.... I can’t recommend them enough. Read more
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