Filing Credit Card Bankruptcy: Unsecured Debt Relief

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Many to most debtors have a significant amount of credit card related debt. In limited instances, these debts may stem from reckless consumer spending, but more frequently, debtors facing overwhelming credit card debts incurred the debts while trying to meet the most basic financial obligations, such as paying medical bills, addressing monthly expenses, or covering housing payments in light of unemployment or the simple inability to make increasingly costly payments over time. Fortunately, filing credit card bankruptcy is a viable option for these individuals or households.

Credit Card Debt and Chapter 7

In short, Chapter 7 bankruptcy provides the debtor the chance to discharge all unsecured debt obligations, which will include virtually all credit card related debt. Generally, the only reasons a debtor involved in Chapter 7 may be denied discharge of certain unsecured debts is if he or she obtained the credit card financing via fraud, or if he or she did not intend to repay the borrowed money from the outset. Proving intent at the time of receipt of credit card is often impossible, and in turn, the majority of debtors were not engaged in fraud while signing up for any of their credit accounts.

While Chapter 7 will discharge all unsecured debts, it does not discharge secured debt obligations or certain other debt obligations, including taxes owed, child support payments, alimony payments, and certain civil judgments. Additionally, Chapter 7 discharge comes at a price: liquidation. In short, a debtor must liquidate any non-exempt assets under the Chapter 7 process in order to receive the benefits of discharge. The reality, however, is that most debtors eligible for Chapter 7 rarely have significant assets to liquidate in the first place, or if they do, the value of these assets are significantly less than the outstanding value of dischargeable debts owed.

Potential Problems Relating to Credit Card Discharge

A looming issue for anyone considering filing Chapter 7 to obtain discharge of credit card debt is the eligibility requirements for the Chapter 7 process. In short, a debtor must undergo two sets of income tests to determine if he or she is eligible to file under Chapter 7. Another consideration, as mentioned above, is whether the debts were incurred under the pretenses of fraud or bad faith. Finally, understanding the specific nature of an individual’s debts, including whether they are eligible for discharge, is essential.

Getting Legal Help with Credit Card Bankruptcy Filing

In short, the case-specific nature of every bankruptcy filing, including the unique nature and amount of debts owed and assets held by a debtor, will require the insight of a bankruptcy lawyer to determine how Chapter 7, or even Chapter 13 bankruptcy may benefit a given debtor or household. For more information and insight, including critical pre-bankruptcy planning and counsel, consult with a bankruptcy lawyer today.