Bankruptcy is often viewed as a last resort for individuals facing overwhelming debt. It can provide relief and a fresh financial start, but not all debts are treated the same way in bankruptcy. One common question is whether credit card debt can be discharged through bankruptcy. In this article, we’ll explore the potential for discharging credit card debt in bankruptcy and the factors that influence this outcome.
Chapter 7 Bankruptcy and Credit Card Debt
Chapter 7 bankruptcy is a form of personal bankruptcy that allows for the discharge of certain types of debt. Credit card debt is typically included in this category and can often be discharged in a Chapter 7 bankruptcy. To achieve this, you must meet specific criteria and successfully complete the bankruptcy process.
Criteria for Discharging Credit Card Debt
To discharge credit card debt in a Chapter 7 bankruptcy, you must demonstrate that you meet the following criteria:
- Passing the Means Test: The means test assesses your income and expenses to determine if you qualify for Chapter 7 bankruptcy. If your income falls below a certain threshold or you can demonstrate that you lack the means to repay your debts, you may be eligible for Chapter 7.
- No Fraudulent Activity: If you’ve engaged in fraudulent or dishonest activity related to your credit card debt, it may not be dischargeable. Examples include making extravagant purchases shortly before filing for bankruptcy or providing false information to obtain credit.
- No Recent Cash Advances: If you’ve taken cash advances on your credit cards shortly before filing for bankruptcy, those advances may not be dischargeable.
Chapter 13 Bankruptcy and Credit Card Debt
Chapter 13 bankruptcy is another option for addressing credit card debt. Instead of discharging the debt, Chapter 13 involves a repayment plan, typically spanning three to five years. The advantage is that you can often pay off a portion of the credit card debt under more favorable terms, which can make it more manageable.
Exceptions to Discharge
It’s important to note that there are exceptions to the discharge of credit card debt in bankruptcy. If you’ve engaged in fraudulent or improper behavior, or if you have non-dischargeable debts like certain taxes or court-ordered payments, these obligations may not be eliminated.
Conclusion
While credit card debt is generally dischargeable in bankruptcy, it’s essential to consult with a bankruptcy attorney to determine your eligibility and the best course of action. Bankruptcy laws can be complex and may vary depending on your specific circumstances. Seeking professional guidance is advisable to ensure a successful bankruptcy process and relief from credit card debt.