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CREDIT CARD DEBT IN BANKRUPTCY CASES
Best Bankruptcy Lawyers Near Me
Are you struggling with credit card debt? Firstly, you should try to use this credit card interest calculator to help you keep on top of things. Do you have credit card debt that you are unable to pay? Are bill collectors or creditors calling you day and night? For most people, the constant harassment from debt collectors is what leads them to consider bankruptcy relief. Almost five million Americans are now carrying delinquent balances on their credit cards. As with residents in other states, Alabama residents have large amounts of debt in many forms. It’s no surprise, then, that the average Alabama resident carries thousands of dollars in credit card debt. They will still be able to get credit cards, but they would end up getting a credit card with no credit. These kinds of credit cards are designed for people who have a poor credit score. Credit card debt is the most common type of debt in America. Credit card debt, like most other forms of debt, can usually be discharged by filing for bankruptcy. Credit card debt is referred to as unsecured debt. Chapter 7 bankruptcy is designed to quickly eliminate all of your credit card debt. In Chapter 7 bankruptcy, debtors are usually able to discharge all credit card debts. Generally, credit card debts are treated like other unsecured claims in Chapter 7 cases. In most cases, your obligation to pay the balance will be discharged upon the successful completion of your bankruptcy case.Cosigners on Credit Card Debt<
When you file a Chapter 7 bankruptcy, only you are discharged. Chapter 7 does not protect guarantors or cosigners. If anyone else is liable for charges that you made on a credit card, they will still be liable after you file for Chapter 7 bankruptcy, regardless of whether the claim is dischargeable against you.Credit Card Fraud
The following circumstances can cause credit card companies to challenge your discharge:- Increase in credit card usage shortly before filing bankruptcy
- Lied on credit card application
- Newly issued credit card
- Large cash advances in months before filing bankruptcy
- Use of credit card for recent travel or vacations
- Pattern of borrowing on one card to make payments on other cards; >
- Exceeding credit limit
- Using credit card when unemployed
- Large balance at filing
- Purchase of luxury goods before filing bankruptcy
- Charges made after consulting bankruptcy lawyer
Credit-Card Debt in Bankruptcy Frequently Asked Questions
The following answers provide general information about credit-card debt in bankruptcy. Bankruptcy cases are fact-specific, and statutory amounts, official forms, filing requirements, and court procedures may change. Speak with a bankruptcy attorney about the law applicable to your circumstances.
Can credit-card debt be discharged in bankruptcy?
Yes. Most ordinary credit-card debt is unsecured debt and may be discharged in Chapter 7 or treated through a Chapter 13 repayment plan, subject to eligibility and any applicable exceptions.
Is credit-card debt considered unsecured debt?
Credit-card debt is usually unsecured because it is not backed by collateral. Secured credit-card accounts and debts connected to collateral may be treated differently.
How does Chapter 7 treat credit-card debt?
In Chapter 7, qualifying credit-card balances are generally treated as unsecured claims. If the debtor receives a discharge and no exception applies, personal liability for those balances is usually eliminated.
How does Chapter 13 treat credit-card debt?
In Chapter 13, credit-card issuers generally receive the distribution required by the confirmed repayment plan. Qualifying unpaid balances may be discharged after successful completion of the plan.
Do I have to repay all credit-card debt in Chapter 13?
Not always. The amount paid to unsecured credit-card creditors depends on income, expenses, nonexempt property, priority debts, secured debts, plan requirements, and other case-specific factors.
Can a credit-card company object to discharge?
Yes. A credit-card issuer may challenge dischargeability by filing a court proceeding and alleging fraud, false pretenses, false representations, or another recognized exception.
What credit-card activity may raise fraud concerns?
Large or unusual charges shortly before filing, recent cash advances, luxury purchases, false statements, borrowing without a reasonable ability or intent to repay, and a sudden increase in account use may receive additional scrutiny.
Are recent luxury purchases dischargeable?
Certain consumer debts for luxury goods or services incurred shortly before filing may be presumed nondischargeable when statutory timing and dollar requirements are met. Those thresholds change periodically.
Are recent cash advances dischargeable?
Certain cash advances obtained shortly before filing may be presumed nondischargeable when the applicable statutory conditions are satisfied. The amount and timing should be reviewed carefully.
Is using a credit card before bankruptcy automatically fraud?
No. Using a credit card before bankruptcy is not automatically fraud. The court may consider timing, amount, purpose, financial condition, payment history, and whether the debtor intended or reasonably expected to repay the charges.
Should I stop using credit cards before filing bankruptcy?
A person considering bankruptcy should avoid unnecessary new charges and cash advances and should discuss recent card activity with an attorney. Continuing to incur debt without a realistic ability or intent to repay can create serious problems.
What if I used a credit card for groceries or necessities?
Charges for ordinary necessities are not automatically nondischargeable. However, recent charges may still be examined based on the facts, including timing, amount, financial condition, and intent.
What if I used a card after speaking with a bankruptcy lawyer?
Charges made after a person begins planning bankruptcy may receive closer scrutiny, especially when they are unusual or unnecessary. All recent use should be disclosed to the attorney.
What if I transferred balances between credit cards?
Balance transfers generally move debt from one creditor to another rather than eliminate it. Transfers shortly before filing may be reviewed for intent, representations, cash access, and other circumstances.
What if I used one card to pay another card?
Using one credit account to pay another can be a warning sign of financial distress. The transactions should be disclosed because the trustee or creditor may review the pattern and timing.
Can exceeding my credit limit affect discharge?
Exceeding a credit limit does not automatically make the debt nondischargeable. It may be one fact considered with account history, recent charges, financial condition, and representations made to the creditor.
Can false information on a credit-card application affect bankruptcy?
A creditor may challenge dischargeability if it relied on a materially false written statement about financial condition that was made with intent to deceive. The specific facts and legal requirements matter.
What happens to a co-signer in Chapter 7?
A Chapter 7 discharge generally protects only the debtor who filed. A co-signer, guarantor, or joint account holder may remain legally responsible for the debt.
Does Chapter 13 protect a credit-card co-signer?
Chapter 13 may provide a co-debtor stay for certain consumer debts. The protection is limited, and a creditor may ask the court for relief under some circumstances.
What happens to an authorized user on my credit card?
An authorized user is not necessarily liable for the account merely because the person was permitted to use it. Liability depends on the account agreement, state law, and whether the person is a joint account holder or co-signer.
Can a joint credit-card account be discharged for both people?
A bankruptcy discharge generally applies only to the person who filed. A nonfiling joint account holder may remain responsible for the balance.
Will bankruptcy stop credit-card collection calls?
Filing bankruptcy generally triggers the automatic stay, which usually stops collection calls, letters, lawsuits, and other attempts to collect prefiling credit-card debts.
Will bankruptcy stop a credit-card lawsuit?
The automatic stay generally pauses most collection lawsuits after filing. The creditor may still file a proof of claim or pursue a dischargeability action when legally permitted.
Will bankruptcy stop a credit-card wage garnishment?
The automatic stay generally stops most wage garnishments for credit-card judgments after the bankruptcy filing. The garnishment agency and creditor may need prompt notice of the case.
Can bankruptcy eliminate a credit-card judgment?
A discharge may eliminate personal liability for a qualifying credit-card judgment. However, a judgment lien that attached to property may require a separate lien-avoidance analysis.
Does bankruptcy remove a credit-card lien from my property?
Not automatically. Most credit-card debts are unsecured, but a creditor with a valid judgment lien may retain rights against property unless the lien is avoided or otherwise addressed under bankruptcy law.
Should I keep paying credit cards before filing?
Payment decisions depend on timing, available funds, essential expenses, co-signers, secured accounts, and the filing plan. A person should obtain individualized legal advice before stopping payments or favoring one creditor.
Can paying one credit card before filing cause problems?
Large payments to one creditor shortly before bankruptcy may be reviewed as preferential transfers. The trustee may be able to recover certain payments, although ordinary small payments may be treated differently.
Can I keep one credit card out of bankruptcy?
A debtor must disclose all debts and creditors. A creditor may close or restrict an account after learning of the bankruptcy, and the debtor cannot guarantee that an account will remain available.
Do I have to list credit cards with a zero balance?
A zero-balance account may not be a debt, but bankruptcy forms require complete and accurate financial disclosure. The attorney should review all open accounts and recent account activity.
Will my credit-card accounts be closed after filing?
Many credit-card issuers close or suspend accounts after a bankruptcy filing, including some accounts with no balance. Each issuer has its own policies.
Can I get a credit card after bankruptcy?
Many people receive credit offers after bankruptcy, but terms may include higher rates, fees, or lower limits. New credit should be evaluated carefully and used only when affordable.
How long will bankruptcy affect my credit report?
A Chapter 7 bankruptcy may remain on a credit report for up to ten years from filing, while a Chapter 13 case may generally remain for up to seven years. Individual account reporting can vary.
Can I rebuild credit after discharging credit-card debt?
Yes. Credit may be rebuilt by reviewing reports for accuracy, paying ongoing obligations on time, keeping balances manageable, maintaining stable income, and avoiding excessive applications for new credit.
Can credit-card rewards or points be lost in bankruptcy?
Rewards programs are governed by their terms, and an issuer may cancel points or close the account after filing. Valuable rewards should be disclosed and discussed with an attorney before filing.
Are business credit cards discharged in personal bankruptcy?
Personal liability on a business credit card may be dischargeable when the individual is legally obligated on the account. Liability of a separate company or another guarantor may continue.
Can credit-card debt from gambling be discharged?
Gambling-related credit-card debt is not automatically nondischargeable, but recent or substantial gambling charges may receive close scrutiny for fraud, intent, and the debtor’s ability to repay.
Can credit-card debt from a divorce decree be discharged?
The bankruptcy treatment may depend on whether the obligation is owed directly to the card issuer, allocated between former spouses, or characterized as support or another divorce-related obligation.
What documents should I bring for a credit-card debt consultation?
Helpful documents include recent credit reports, card statements, collection letters, lawsuit papers, garnishment notices, income records, tax returns, bank statements, and information about recent charges, cash advances, and balance transfers.
Does Ferguson & Ferguson offer free credit-card debt consultations?
Yes. Ferguson & Ferguson offers free bankruptcy consultations for people dealing with credit-card debt. The Huntsville office can be reached at 256-534-3435, and the Decatur office can be reached at 256-350-7200.
Where are Ferguson & Ferguson’s bankruptcy offices located?
The Huntsville office is located at 303 Williams Avenue SW, Suite 321, Huntsville, Alabama 35801. The Decatur office is located at 211 Oak Street NE, Decatur, Alabama 35601.