Introduction: Clear Up the Confusion About Credit Card Debt in Bankruptcy
Have you heard the myth that filing for Chapter 7 bankruptcy won’t help with credit card debt? If so, you’re not alone. Misunderstandings about bankruptcy can prevent people from seeking the relief they need.
Here’s the truth: most credit card debt is entirely dischargeable in Chapter 7 bankruptcy. Let’s dive into how it works, what exceptions exist, and why speaking with an experienced Kansas City bankruptcy attorney is crucial before making any decisions.
What Happens to Credit Card Debt in Chapter 7 Bankruptcy?
Unsecured Debt and Dischargeable Credit Card Balances
Credit card debt is considered unsecured debt, meaning it is not tied to any property like a car or home. In most Chapter 7 bankruptcy cases:
- Credit card balances are wiped out: The court discharges this debt, freeing you from repayment.
- You get a fresh start: This makes bankruptcy an effective option for those overwhelmed by credit card bills.
When Credit Card Debt May Not Be Discharged
There are exceptions to the discharge rule, including:
- Fraudulent Charges: Debt incurred through fraudulent actions, like submitting false credit card applications or racking up charges with no intent to repay, may not be forgiven.
- Recent Charges: If you’ve made large luxury purchases or cash advances within 90 days before filing, those debts might not qualify for discharge.
Types of Debt in Chapter 7 Bankruptcy: What You Can and Can’t Discharge
Fully Dischargeable Debts
Chapter 7 bankruptcy is designed to eliminate various types of unsecured debts, including:
- Personal loans
- Repossession deficiencies
- Auto accident claims (not involving intoxication)
- Business debts (you signed a personal guarantee)
- Judgments from lawsuits
Non-Dischargeable Debts
Certain debts cannot be eliminated through Chapter 7 bankruptcy, including:
- Recent taxes
- Child or family support obligations
- Student loans (except in extreme cases)
- Criminal fines or restitution
- Traffic/parking tickets
- Government penalties
What If Creditors Challenge Your Bankruptcy Filing?
Understanding Creditor Challenges
While rare, credit card companies can object to a bankruptcy discharge. They may argue:
- Fraudulent Behavior: Claiming the cardholder had no intention of repayment.
- Recent Activity: Pointing to a pattern of high spending shortly before the bankruptcy filing.
These challenges typically require court involvement to determine the outcome.
Does Filing for Bankruptcy Mean You Keep Credit Card Debt?
Absolutely not. Bankruptcy laws are specifically designed to alleviate financial burdens, including overwhelming credit card balances. Working with an experienced bankruptcy attorney ensures you understand your rights and avoid potential pitfalls, such as creditor challenges.
How to Prepare for Filing Chapter 7 Bankruptcy
What to Do Before Filing
- Review Your Recent Transactions: Avoid major luxury purchases or cash advances close to your filing date.
- Consult an Attorney: Get expert advice to assess your eligibility and create a sound strategy.
- Gather Financial Documentation: Include all debts and assets to ensure accuracy in your filing.
What to Expect During the Process
- Automatic Stay Protection: Filing immediately stops collection calls, lawsuits, and wage garnishments.
- Fast Resolution: Most Chapter 7 cases are completed within four to six months.
Questions to Ask Before Filing Chapter 7 Bankruptcy
- Will all my credit card debt qualify for discharge?
- Are there risks of creditor challenges in my case?
Ready for a Fresh Start? Contact Us Today!
Don’t let the weight of credit card debt hold you back from living your life. Our skilled Kansas City bankruptcy attorneys can help you navigate the process and determine if Chapter 7 bankruptcy is the right solution for you.
Reach out today to get started. Your financial freedom is just one step away!
