Facts About Credit Card Debt and Consumer Bankruptcy

While it is difficult to pinpoint with certainty how often credit card debt alone leads to consumer bankruptcy filings, credit card debt is a commonly cited factor in a majority of Chapter 7 bankruptcy cases, as well as in Chapter 13 bankruptcy filings. If you are currently struggling with credit card debt and wondering if you should consider personal bankruptcy, it is smart to seek legal advice sooner rather than later. Much too often, debtors wait for months, or even years, before seeking legal advice. In that time, credit card debt — along with interest and fees — often continues to accrue, making the debtor’s financial situation even more stressful than it was earlier on. In addition, as debtors struggle over time to pay off credit card debt, other bills and credit accounts can suffer, and the debtor can find themselves with additional debt such as personal loan debt, medical debt, and educational debt.

If you are having difficulty with credit card debt, you should find out more about the possibility of a consumer bankruptcy filing. What should you know about credit card debt and consumer bankruptcy? Consider the following information from our West Palm Beach bankruptcy lawyers.

Credit Card Debt is Usually Dischargeable in Chapter 7 Bankruptcy Cases 

Under the US Bankruptcy Code, credit card debt will typically be dischargeable in a Chapter 7 bankruptcy case. What this means is that there is no limitation on the amount of credit card debt that can be discharged, and it is unlikely to fall into the category of nondischargeable debt. Likewise, credit card debt is typically dischargeable in Chapter 13 bankruptcy cases, too, but it is important to be aware that there is a three to five year repayment plan period before remaining eligible debts are discharged.

One of the only exceptions to credit card debt being dischargeable is if it falls into the category of luxury goods or services, which would only apply to certain types of charges made in the months leading up to your bankruptcy filing.

You Will No Longer Be Liable for Discharged Credit Card Debt 

Once credit card debt is discharged, you are no longer liable for it. Accordingly, creditors cannot contact you about it, sue you for it, or take any other actions.

Secured Credit Card Debt Can Be Discharged 

Most credit cards are unsecured, which means there is no collateral that the creditor can repossess if you do not make your payments. If you filed for bankruptcy in the past, however, or if you were attempting to build up your credit with a poor credit history or limited credit history, you may have one or more secured credit cards. Unlike traditional unsecured credit cards, to obtain a secured credit card, you will typically need to provide the creditor with a security deposit. While debt on a secured credit card is typically dischargeable, you will lose your security deposit if you have the debt discharged.

Contact Our West Palm Beach Bankruptcy Attorneys Today 

If you have any questions about discharging your credit card debt, you should seek advice from an experienced West Palm Beach bankruptcy lawyer at Kelley, Fulton, Kaplan & Eller today.

Sources:

federalreserve.gov/releases/g19/current/

law.cornell.edu/uscode/text/11

newyorkfed.org/microeconomics/hhdc