Our new clients often ask us whether filing for bankruptcy 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.