Which Type of Bankruptcy Is Best for Credit Card Debt?

Credit card debt is one of the most common reasons for consumers to file for bankruptcy. Our ability to hand over a piece of plastic (or type some numbers into a website billing page) has made it far too easy to outspend far beyond our earnings. Once things have gotten past a certain point, catching up on your bills may seem impossible, and if so then a Chapter 7 bankruptcy is probably your best bet – assuming that you can qualify for one.

One of the first steps to filing for Chapter 7 bankruptcy is to determine your eligibility. People who have an income that is too high (with expenses that are too low) will likely have to opt for a Chapter 13 bankruptcy that leaves them responsible for paying at least some of what they owe, perhaps over a longer period of time or at a lower interest rate. But for those who do qualify, filing for Chapter 7 bankruptcy is likely the best answer to credit card debt.

It is important to remember that fraudulent credit card charges will not be discharged in a Chapter 7 bankruptcy. The bankruptcy court defines fraudulent credit charges in two ways:

  • The purchase of luxury good within 90 days of filing for bankruptcy
  • Cash advances over $950 within 70 days of filing for bankruptcy

These exceptions were put in place to prevent people from running up their credit card bills in anticipation of discharging their debts. Though the purchase of necessary goods such as gasoline, food or clothing do not count as luxury goods, purchases on a single credit card of more than $675 worth of goods or services not necessary for the support or maintenance of the cardholder or their dependents are.

Keep in mind that the only way that a credit card charge will be considered non-dischargeable is if the credit card company files a complaint. The credit card companies have 60 days from the date of the creditors’ meeting to do so. Without a complaint being filed, all charges will be discharged. If you apply for bankruptcy and have made these types of purchases without fraud or misrepresentation in mind, you will have the opportunity to defend the purchase during your bankruptcy proceeding.

Contact Jensen Bagnato to schedule a consultation about your credit card debt bankruptcy case.