If you have credit card debt, it is important to know how this will be treated in Chapter 7 bankruptcy. Typically, credit card debt is treated in the same manner as every other unsecured claim. While not always the case, your balance will likely be discharged once you complete the Chapter 7 process.
Here is when you Could Face Trouble
There are exceptions to every rule, and the same thing holds true with Chapter 7 bankruptcy and credit card debt. If you incurred credit card debt through false misrepresentation or fraud, the dischargeability can be challenged.
Here is when credit card charges can be considered fraudulent:
- If you took a cash advance of $925 or more within 70 days of filing for Chapter 7. In this case, your debt is considered non-dischargeable, regardless of what you used the money for.
- Luxury goods. Did you use your credit card to purchase a luxury good (or goods) valued at $650 or more within 90 days of filing? If so, your debt is considered non-dischargeable.
Why does the bankruptcy court care? Since most people know they are going to file bankruptcy and have their credit card debt discharged, it is only fair for limitations to be put on spending. If not, anybody could run up a large balance and subsequently have it discharged.
If you are honest with the court and did not take part in any fraudulent credit card activity, it is likely that your debt will be discharged during Chapter 7 bankruptcy. Conversely, if you took place in fraudulent spending or misrepresented yourself, your debt may be not discharged.
Do you have questions about Chapter 7 bankruptcy and credit card debt? Contact us to learn more.