Getting Rid of Credit Card Debt With Bankruptcy

With a few exceptions, your credit card debt will be discharged in bankruptcy.

By , Attorney · University of the Pacific McGeorge School of Law

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.

Credit Card Debt in Chapter 7 Bankruptcy

Chapter 7 bankruptcy will "discharge" or eliminate almost all unsecured, nonpriority debts. Medical bills, personal loans, and most credit card debt are typical examples of unsecured, nonpriority debt that can be wiped out in bankruptcy.

Examples of nondischargeable priority debts you'll remain responsible for include child support and newer tax debts. Student loans are the most common type of nonpriority unsecured debt you'll pay after bankruptcy.

In return, you must give up "nonexempt property" or property you can't protect with a bankruptcy exemption. The Chapter 7 bankruptcy trustee will sell your nonexempt property and distribute the proceeds to your creditors.

Can I File Chapter 7 Bankruptcy on Credit Cards Only?

In Chapter 7, you must include all debt in your bankruptcy case. But, you can voluntarily repay creditors after the bankruptcy is over if you choose to do so. However, it would be very unusual to repay a credit card debt and it's unlikely the creditor would agree to reinstate your card privileges.

Credit Card Debt in Chapter 13 Bankruptcy

In Chapter 13 bankruptcy, you repay your creditors fully or partially through a repayment plan lasting 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 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.

Exceptions to Discharging Credit Card Debt in Bankruptcy

In a few cases, you won't be able to wipe out your credit card debt in bankruptcy.

You Can't Get Rid of Credit Card Debt Incurred Due to Fraud

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 any balance remaining after your case ends. Here are a few common situations:

  • You made a false statement on your credit card application to deceive the creditor that was "material" to the credit card issuer's decision to extend credit to you. For example, you grossly inflated your income.
  • You charged more than $800 to any single creditor for luxury goods or services within 90 days of your bankruptcy filing. In this situation, the law presumes that your intent was fraudulent.
  • You got a cash advance from a single creditor totaling more than $1,100 within 70 days of your bankruptcy filing.

The amounts are valid for three years as of April 1, 2022, and good through March 31, 2025. (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.

How a Creditor Can Object to a Discharge Based on Fraud During Your Bankruptcy Case

Sometimes the credit card company has grounds to object to the discharge of the debt. The most common creditor objections are fraud-based (as discussed above). A creditor must litigate one of the two fraud objections in an adversary proceeding (trial)—presumptive fraud or general fraud.

One of the ways a debtor can successfully dispute a fraud allegation is by proving that the charges were for necessary items. Necessary items include purchases for living expenses such as utilities, food, or needed clothing. Because of the serious nature of a fraud allegation, you'll want to discuss your options with a bankruptcy lawyer.

You Can't Keep the Property When the Credit Card Debt Is Secured

In rare situations, the credit card lender might 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.

The one catch a lender might run into when attempting to get the property back? They can't enter your home to retrieve it without a court order. Learn more about secured property.

Can the Credit Card Companies Sue Me After My Bankruptcy?

No, not if the court discharges the debt in your bankruptcy. 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.

However, if a creditor successfully asks the court to find the debt nondischargeable in an adversary proceeding, you'll remain responsible for paying any remaining debt balance after your discharge.

Updated April 23, 2022

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