Chapter 7 Bankruptcy Will Wipe Away, Discharge, Your Credit Card Debt In Almost All Cases.
Most filers have credit card debt that is bearing down on them. It is then expected that the main reason most people file Chapter 7 bankruptcy is to wipe out or discharge their credit card debt. Unless the creditor can show actual fraud or misrepresentation by the filer, in most situations, the filer’s credit card debt will go away and she doesn’t have to pay the balance of what she owes on the credit card.
Credit Cards Companies Usually Do Not Get Any Money
The trustee, the person in charge of your assets, distributes the funds from your estate, if any. In most cases Chapter 7 filers have no assets. The no-asset cases will result in no property to sell to satisfy creditors. However, even if the filer has assets that the trustee can sell, the credit card companies usually don’t get any funds because credit cards are nonpriority debts. That means that credit card companies are last in line to get any money, which normally means that they wont get any money.
Effect of Fraud and Misrepresentation on Credit Card Debt in Chapter 7 Bankruptcy
Chapter 7 Bankruptcy usually discharges credit card debt, however, in cases where the creditor can prove actual fraud, misrepresentation, or false pretenses will result in a nondischargeable debt. That means that filer has to pay back the credit card debt.
Presumed Fraudulent Credit Card Debt
The debt is presumed to be nondischargeable if the debtor has used a single credit card to buy more than $725 worth of luxury goods or services within 90 days of filing for chapter 7 bankruptcy. Food, clothing, and gasoline are not usually considered to be luxury goods since any goods or services reasonably necessary for the support or maintenance of debtor or debtor’s dependents are not considered as luxury goods.
The debt is presumed to be nondischargeable if the debtor use a credit card to get $950 in cash advances within 70 days of filing bankruptcy. The presumption means that the burden is on filer to prove that she intended to and reasonably believed that she could repay the charge when she incurred it. This is obviously extremely difficult to do.
Chapter 7 bankruptcy Does not Alleviate the Obligation of Debtor's Cosigners or Guarantors
If your employer, family member or friend has cosigned or guaranteed your credit card debt, they will continue to be liable for any amount owed to the credit card companies. The discharge, wiping out of balance of credit card debt, applies only to you, the debtor.