How Will My Credit Card Debt Be Handled In A Bankruptcy Case?

Are you one of the millions of Americans with credit card debt? If you are currently struggling with credit card debt and you are considering bankruptcy, you are likely wondering: how will my credit card debt be handled in a bankruptcy case? In general, U.S. bankruptcy law allows credit card debt to be discharged in Chapter 7, Chapter 13, and other types of individual bankruptcy cases. However, there are some key limitations that you should know about. The West Palm Beach bankruptcy lawyers at our firm can tell you more about recent credit card debt and how it is handled in consumer bankruptcy cases in South Florida.

Credit Card Debt is At Its Highest Point 

Credit card debt is currently at its highest point in the United States, according to a WalletHub article. Indeed, during the end of 2022, credit card debt in America increased by nearly 86 billion, which was a rise in credit card debt “1.8 times larger than the post-Great Recession average for the fourth quarter of a year.” Charge-offs, for unpaid debt, also rose by more than 25 percent in the fourth quarter of 2022. A number of Florida cities were on the list of largest increases in consumer credit card debt, including Jacksonville, Tampa, St. Petersburg, Tallahassee, Orlando, Fort Lauderdale, and Miami.

With consumers taking on more credit card debt, many may be nearing the point of being unable to repay what they owe.

Most Credit Card Debt is Dischargeable in Personal Bankruptcy Cases 

Debts in bankruptcy cases are classified as dischargeable or non-dischargeable debts (or, for non-dischargeable debts, “exceptions to discharge”). Debts that are in the category of exceptions to discharge include family support debt, certain tax debts, and personal injury debts. Credit card debt is not in that category.

To be sure, credit card debt is a type of dischargeable debt, and most individuals who file for bankruptcy can expect to have credit card debt discharged.

Exceptions: Credit Card Charges as Luxury Goods and Recent Cash Advances 

While credit card debt is dischargeable, it is important to know that there are a couple of key exceptions to keep in mind.

If you make credit card charges above a certain amount within 90 days of filing for bankruptcy, these charges can be classified as luxury item charges and can be non-dischargeable. In general, charges of more than $800 in the 90 days before your bankruptcy filing may be non-dischargeable for this reason, identified as presumptive fraud. In addition, certain cash advances made on a credit card within 70 days of your bankruptcy filing may also be non-dischargeable. If you have any concerns, you should talk with a bankruptcy lawyer about your circumstances.

Contact the West Palm Beach Bankruptcy Attorneys at Our Firm 

There are many kinds of debt that are dischargeable in personal bankruptcy cases, including credit card debt. Generally speaking, credit card debt is a type of dischargeable debt, but there are some exceptions depending upon when the credit card debt was accrued. If you have any questions about discharging credit card debt in your bankruptcy case, or if you have other questions about debt discharges and exceptions to discharge, an experienced West Palm Beach bankruptcy attorney at Kelley Kaplan & Eller can assist you.

Sources:

wallethub.com/edu/cc/credit-card-debt-study/24400

law.cornell.edu/uscode/text/11

law.cornell.edu/uscode/text/11/523