Can a Bankruptcy Help With Credit Card Debt?

If you’ve gotten yourself into significant debt through the overuse of your credit cards, you are certainly not alone. Credit card companies have made it all-too-easy to qualify for a card, and once you have that piece of plastic in your wallet it can quickly transform into a sort of magic wand that you can reach for whenever you want something – whether you can afford it or not.

Whether your credit card debt has mounted as a result of a lack of discipline or because you used it to pay for an emergency expense like medical bills or a broken water heater, if your debt has grown beyond your ability to pay, bankruptcy may be the only way for you to get out from under. Depending upon your personal circumstances, you will need to determine whether a Chapter 7 or Chapter 13 bankruptcy is more appropriate, but either one will provide relief.

To qualify for Chapter 7 you’ll need to pass a means test that demonstrates your inability to pay off your debts within five years, while Chapter 13 provides a plan that will reorganize your debts and create a payment plan over a period of years. Because Chapter 7 discharges unsecured debt, it wipes out your credit card bills entirely, though you may need to sell some of your nonexempt property for distribution to your creditors. By contrast, Chapter 13 does not wipe out your credit card debt entirely but is likely to reduce it.

The one exception that you need to be aware of with regard to bankruptcy and credit card debt has to do with fraud. If it is shown that you lied on your credit card application in order to qualify, or if you charged more than $725 on a credit card for a high-ticket item or service within 3 months of your filing, the bankruptcy court will assume that you did so knowing that you were about to file for bankruptcy and will consider the charge intentional. The same is true of a cash advance on a credit card of more than $1,000 within 70 days of your filing.

No matter what type of debt you have accrued, finding the right form of relief can be confusing and overwhelming. To get answers to your bankruptcy questions, contact us today to set up a time for a consultation.