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Credit Card Debt

Bankruptcy is very good at wiping out credit card debt. Unless you have a special "secured" credit card, your credit card balance is an unsecured debt -- that is, the creditor does not have a lien on any of your property and cannot repossess any items if you fail to pay the debt. This is precisely the kind of debt that bankruptcy is designed to eliminate. Besides credit card debt, you may have other unsecured debts, and bankruptcy can wipe these out as well.

If you file for Chapter 13 rather than Chapter 7, you may have to pay back some portion of your unsecured debts. However, any unsecured debts that remain once your repayment plan is complete will be discharged.

Credit card companies sometimes challenge the discharge in bankruptcy of debt owed to them, by claiming that the debt was fraudulently charged by:

  • Submitting a fraudulent application
  • Using the card without any intent to repay the debt

In deciding whether credit card debt was "fraudulent," a judge will consider:

  • The length of time between the charges and the bankruptcy filing
  • Whether or not an attorney was consulted before you charged the debt
  • The number of charges you made
  • The amount of the charges
  • Your financial condition at the time you charged
  • Whether the charges were above your credit limit
  • Whether you made multiple charges on the same day
  • Whether or not you were employed
  • Your employment prospects
  • Whether there was a sudden change in your buying habits
  • Whether the purchases were luxuries or necessities. Luxury goods over $500 purchased within 90 days of filing cannot be discharged in bankruptcy. Nor can cash advances of more than $750 taken within 70 days of filing.

If you have run up your credit cards in the 2-3 months prior to filing for bankruptcy, it is likely you will have to pay those debts in full.

 

For a free consultation about credit card debt and bankruptcy, contact us toll-free at (800) 775-1820. We are available to represent people in DuPage County and the surrounding parts of Illinois, including Will, Cook, Kendall, Kane, Kankakee, Lake, McHenry, LaSalle and Grundy Counties.