Many people file for bankruptcy because they’ve racked up excessive credit card debt, often using the credit to pay for necessities, like car repairs or medical bills. Both Chapter 7 and Chapter 13 bankruptcy can wipe out credit card debt, with a few exceptions.
Chapter 7 bankruptcy will discharge (wipe out) most or all unsecured, nonpriority debt. Medical bills, personal loans, and most credit card debt are typical examples of unsecured, nonpriority debt you can wipe out in bankruptcy. Examples of nondischargeable priority debts that you'll remain responsible for paying include child support and certain tax debts.
In return, you must give up your nonexempt property, or property that isn’t protected by a bankruptcy exemption. The Chapter 7 bankruptcy trustee will sell your nonexempt property and distribute the proceeds to your creditors.
In a few cases, you won’t be able to wipe out your credit card debt by filing for Chapter 7.
Sometimes the creditor can challenge the discharge of your credit card debt. If successful, the court will not discharge the debt, and you’ll remain responsible for paying for it after your case ends. Here are a few common situations:
The amounts are valid for three years as of April 1, 2019. (11 U.S.C. § 523(a)(2)(C)(i)(l).) Learn why it's not a good idea to use credit cards before filing for bankruptcy and about other types of bankruptcy fraud.
In rare situations, the credit card lender may take a security interest in some of your property in the credit card agreement. Jewelry, electronics, mattresses, furniture, and large appliances often are collateral securing the purchase—check your contract and receipt. If the debt isn’t unsecured, you’ll be able to wipe out the debt, but the creditor will be entitled to the property securing the obligation. Learn more about secured property.
In Chapter 13 bankruptcy, you repay your creditors in full or in part through a repayment plan that lasts three to five years. The plan usually provides for payment of only a portion of your unsecured, nonpriority debt, like credit card debt.
How much you’ll pay will depend on the amount of your disposable income and the value of your nonexempt property (you keep all of your property in Chapter 13, but you must pay for the nonexempt portion). You’ll pay the larger of the two amounts throughout your plan. Learn about calculating the repayment plan payment.
Most Chapter 13 filers pay only a small percentage of their credit card and other unsecured debts, and, at the end of the repayment period, the remaining credit card balance gets discharged.
In Chapter 7, you must include all of your debt in your bankruptcy case. But, you can voluntarily repay creditors after the bankruptcy is over if you choose to do so. It would be very unusual to repay a credit card debt.
No. Once you file for bankruptcy protection, bankruptcy's automatic stay prohibits most creditors from continuing collection efforts against you. The stay extends to credit card companies and prohibits them from suing you, sending you collection letters, calling you, or engaging in other collection activities. Learn more about bankruptcy's automatic stay.