Credit Card Debt and Bankruptcy
Discharging credit card debt is a crucial part of many bankruptcy proceedings. It’s true that you can use bankruptcy to wipe your credit card debts clean in many circumstances.
If you’re hoping to use a bankruptcy filing for relief from credit card debt, it’s important to understand how the process works and what you should do to maximize the benefits of your bankruptcy filing. You may also want to consult with a Las Vegas bankruptcy lawyer to determine the best course of action for your specific circumstances. Here’s what you need to know about credit card debts and bankruptcy.
Can I Use Bankruptcy to Get Rid of Credit Card Debts?
Yes, you can use bankruptcy to get rid of credit card debts. In fact, many people use bankruptcy primarily to discharge credit card debts. In most bankruptcy proceedings, the court dismisses your credit card debts in whole or in part.
Depending on your assets and your income, you might give up some assets or make partial payments on your credit cards as part of the proceeding. However, in most cases, bankruptcy can be precisely what you need to give you relief from burdensome credit card debts.
Chapter 7 and Chapter 13 Bankruptcy and Credit Card Debts
Both a Chapter 7 filing and a Chapter 13 filing can be useful for discharging credit card debts. In a Chapter 7 filing, you completely erase your credit card debt. Credit card debt is usually an unsecured, non-priority debt. That means it’s last in line when it comes to paying creditors in bankruptcy. If you have a great deal of non-exempt property, some of it may be used to pay your creditors. Otherwise, in many cases, Chapter 7 completely erases credit card debts with the credit card companies receiving no compensation.
A Chapter 13 filing may also completely erase credit card debt. In a Chapter 13 filing, you may make payments towards at least some of your credit card debts over a period of time. Your income and your necessary expenses determine how much you pay towards your credit card debts during a bankruptcy proceeding. At the end of the payment period, the bankruptcy court wipes your remaining credit cards clean, and you owe nothing.
Are There Any Exceptions Where You Can’t Discharge Credit Card Debts in Bankruptcy?
When you’re considering filing for bankruptcy to erase credit card debt, it’s important to know that there are a few situations where bankruptcy doesn’t erase credit card debt. There are three circumstances where you may not be able to fully wipe away your credit debt with a bankruptcy filing:
- False statement on a credit application – If you’re untruthful on an application for credit, you may not be able to discharge the debts that you rack up on the credit. For example, if you make $30,000 each year, but you say on the credit card application that you make $100,000, the credit card company may extend you credit based on false information. When you get credit based on false statements, the credit card company may prevent you from discharging the debt.
- Luxury charges of $725 or more – If you quickly rack up luxury charges of $725 or more in the 90 days leading up to the bankruptcy filing, there’s an automatic assumption that you meant to commit fraud. Luxury goods are items besides your essentials for rent, food, and basic clothing. If you charge too much in the days leading up to your filing, the credit card company may challenge your charges in bankruptcy.
- Cash advance of $1,000 or more – You can’t take a cash advance of $1,000 or more in the 70 days before bankruptcy without triggering complications in the bankruptcy. If you have a $1,000 cash advance in the 70 days leading up to the bankruptcy, there’s a presumption that you took the cash advance in bad faith. There’s a good chance that you can’t discharge the cash advance in bankruptcy.
What Happens If I’m Accused of Credit Card Fraud in Bankruptcy?
If one of the credit card companies wants to challenge your bankruptcy discharge on the basis of fraud, they file paperwork in your bankruptcy case. You must settle the dispute of whether you tried to commit fraud in the bankruptcy case.
The result may be that credit card debts are not dischargeable, but it’s possible that the bankruptcy trustee may overrule the credit card company and discharge your debts if you can show that you didn’t rack up credit card debt knowing that you aren’t going to pay it. Your bankruptcy attorney can give you an informed opinion about whether you’re at risk for a fraud claim in your proceeding.
Can You File for Bankruptcy Just for Credit Card Debts?
No, you can’t file for bankruptcy just for credit cards. If you file for bankruptcy, you must include all of your assets and debts as part of the picture. Experienced legal counsel can help you determine whether it’s in your best interests to file for bankruptcy, taking into account all of your assets and debts.
Can the Credit Card Companies Sue Me After I File for Bankruptcy?
No, the credit card companies can’t sue you after you file for bankruptcy. When your bankruptcy filing is approved, your debts are wiped clean. The debts no longer exist, and the credit card companies cannot take any action against you to try and collect any money or property.
Should I Continue to Pay My Credit Cards If I’m Filing for Bankruptcy?
Once you decide to file for bankruptcy, there’s no benefit to you to continue to pay your credit cards. You should stop paying and allow the credit card debt to become part of the bankruptcy proceeding. However, it’s vital to stop paying only once you make the final decision to file. If you stop paying your credit cards before you file, you open yourself up to lawsuits and other collection actions by the credit card companies.
Contact Our Las Vegas Bankruptcy Attorneys
Are you overwhelmed with credit card debt? You need relief now. At Half Price Lawyers, we offer affordable bankruptcy services from skilled, compassionate attorneys. Call us today for a free consultation about how you can erase credit card debt and get a fresh start.
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