Can filing for bankruptcy clear credit card debt?

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By JohnBarnes

Yes, you can declare bankruptcy to clear your credit card debt. You can also make a repayment plan to stop credit card companies harassing you.

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To clear your credit card debt, you can file Chapter 7 bankruptcy. This chapter of the Bankruptcy Code works to eliminate almost all unsecured consumer debt. Although it will not erase your student loans or taxes, this bankruptcy can give you a fresh start with credit card payments. This type of bankruptcy protects your assets from creditors who may attempt to seize them to repay this type debt.

Bankruptcy petitioners should remember that it can take up to six months for the bankruptcy discharge to be finalized after they file the bankruptcy petition.

Chapter 7: Credit Card Debt: How it Works

  • Credit card issuers might offer credit cards to people who are still in debt.
  • Raise your interest rates
  • Charges late fees
  • Over-balance fees are subject to additional charges
  • Don’t hesitate to give your account to a debt collection agency
  • Refrain from applying for a credit card
  • To claim repossessions, file a lawsuit in debt collection

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Calling you at work or home can be used by collection agencies to demand payment of your entire debt. This harassment is legal, with some exceptions, unless you file Chapter 7 or another method to end creditor harassment.

Talk to a bankruptcy lawyer to determine if Chapter 7 bankruptcy is the right option for you. You will receive an “automatic stay” once you file bankruptcy.

Stop creditors calling

  • You can get rid of unsecured credit card debt
  • Stop garnishment of wages to pay off debts
  • Credit score drops if your credit history is affected.
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What is Chapter 7?

Although anyone can file a Chapter 7 bankruptcy petition in bankruptcy court, you might not be successful every time. You may be denied a Chapter 7 bankruptcy case later on if you fail to follow the terms of the bankruptcy filing or your debt management plan.

To be eligible for Chapter 7 bankruptcy, your average annual income must fall below the median income in your state. This is known as the “Means Test.”

Can I pass the Chapter 7 Means test?

Find out the median income of singles and families in your state from the U.S. Trustee Program. To file Chapter 7 bankruptcy in Oregon, for example, a single earner must have a household income of less than $56,957.

You can subtract certain expenses from the monthly income. You may still be eligible, even if you are not qualified based upon your income.

Chapter 13 Bankruptcy: How to Get Rid Of Credit Card Debt

A bankruptcy attorney should be consulted if you earn more than the median income.

Chapter 13 allows you to file for a repayment plan that gives you more time to repay your debts and prevents creditors from harassing you.

You could have 36-60 months to repay the debt. You will only need to pay off a small portion of your credit card debt. The rest can be paid off.

Reasons Debt Discharge Is Denied

A lawsuit can be filed in bankruptcy, also known as an “adversary proceeding”. A creditor may tell you that some of your debts cannot be discharged. There are many reasons this can occur, but the most common reasons for adversary proceedings are when a debtor purchases luxury goods or uses his credit card to pay for expenses that cannot otherwise be discharged through bankruptcy.

See also  Overview of Bankruptcy

Objection to Luxury Goods

The most common reason a creditor will object to your debt dismissal is when you have purchased “luxury goods” and/or services within 90 days after filing for Chapter 7. These items and services are subject to a $675 cost limit within 90 days.

The courts may decide that luxury is not necessary for you to live day-to-day and for your children. This can make it difficult to decide where the line is — purchasing a bike for your child can be quite different from buying a luxury exercise bike at home for yourself.

Paying Non-Dischargeable Debts Objection

If you use your credit card for items that are not normally discharged in bankruptcy, a creditor could also object to your Chapter 7 debt settlement. This includes:

  • Alimony (spousal support)
  • Support for children
  • Back taxes or taxes
  • Student loans
  • Credit Card companies can sue you before a Chapter 7 filing

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Credit card companies can bring a lawsuit against you for debt collection. They can ask a judge for a personal judgement against you. This will make you personally responsible to your credit card debt.

A lien can be placed on your property if the judge agrees. Your debt will not be considered “unsecured”. Repayment can be made legal by using your personal property. You may be able to use your income, real estate, or car in certain cases to repay your debts.

If the cost of an attorney and often the fees of creditors are prohibitive, you may want to file bankruptcy to stop the lawsuit from going to trial. Although filing bankruptcy will not automatically remove the lien against your property, you can still file a motion to have it removed.

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When should you call a bankruptcy attorney?

To better understand your options, speak to a bankruptcy lawyer if you believe you are unable to repay your credit card debts.

You will need to file paperwork, attend court dates, take part in bankruptcy classes, pay filing fees and comply with many other confusing laws. A bankruptcy attorney can help you if you have the finances.

Many offer a free consultation to discuss your case. You can also hire an attorney to assist you with the process for as low as $2,000.

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This number may seem impossible to achieve if you already have debt. An experienced bankruptcy attorney can help you make the best decisions, stop creditor harassment and get you on track to debt relief. These steps will save you money over the long-term.