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What Happens to Credit Card Debt in Chapter 7 Bankruptcy?

What Happens to Credit Card Debt in Chapter 7 Bankruptcy?

The Federal Reserve conducted a study concluding that 15% of American families spend more money than they receive each month. The same study found that 43% of American families seek loans or use credit cards to make up for their excessive spending. This type of inordinate debt is a substantial part of almost every Chapter 7 bankruptcy case we take.

How does a person ease this financial burden and what happens to their credit card debt once Chapter 7 has is put in motion? Credit card debt is generally unsecured and, therefore, can be completely discharged in Chapter 7 bankruptcy. However, there are a few exceptions to this general rule that you should be aware of.

You cannot seek reprieve from debts if:

  1. It is a credit card debt made within 90 days of filing for luxury goods or service purchases of $675 or more.
  • Chapter 7 may not be able to be discharged.
  1. You made a fraudulent statement in order to induce a creditor to extend credit.
  • If that information was material to the decision to extend your credit, your debt may not be discharged
  1. You received a cash advance of at least $950 within 70 days of filing.
  • This act alone makes you ineligible for discharge.
  1. Credit card companies take a security interest in your property.
  • The debt still has a chance of being discharged, but the creditor may be entitled to the property.

Excessive credit card debt can have crippling effects on the well-being of an individual or family. If you qualify, Chapter 7 bankruptcy could be the most effective way to erase all your credit card debt and give you a fresh start.

Chapter 7 bankruptcy is not suited for everyone because some people may not qualify. If you are struggling with overwhelming debt, reach out to our firm online or contact us at (239) 970-6844 for a free consultation.

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