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Can You Claim Bankruptcy On Credit Cards

The Details Of The Bankruptcy Case:

Can credit card debt be discharged in bankruptcy?

The 74-year-old debtor applied for a Lowes credit card on March 15, 2008. She said she had an annual income of $48,000. In fact, her only income was $667 in monthly Social Security payments. Her credit application was approved with a credit line of $12,500. Between May 13 and May 16, the debtor used the card to purchase approximately $5,000 worth of gift cards. There was a balance of $6,039 on the account when she filed for Chapter 7 relief on Aug. 29, 2008. Prior to filing for bankruptcy, the debtor made three payments on the account totaling $160.

The bankruptcy court ruled that the debtors intention of repaying the cards was not based on any real ability to repay and that since the creditor had relied on the debtors false income statement the debt should not be discharged in bankruptcy.

Lets Take A Look At A Few:

  • Post-bankruptcy debtors should take a look at their credit limit on the credit card before they apply. A low credit limit on your credit card will require that you avoid spending too much on the credit card. Credit cards which are maxed out could negative impact your credit score.
  • What is the credit cards APR or annual percentage rate? The APR is the interest charged on debt which you have not paid off during the grace period. Post-bankruptcy debtors should try to avoid high APRs and avoid carrying a balance.
  • Is your APR fixed or variable? Unfortunately many subprime credit cards have variable interest rates. For debtors exiting bankruptcy, finding a fixed interest rate credit card could be most beneficial especially considering the possibility that interest rates may go up.
  • How long do you have before interest accrues? The grace period is especially important for post-bankruptcy debtors who want to avoid interest charges. Some charge cards, such as AMEX have no grace period, so be careful. And never assume that a grace period is 30 days, some credit cards have grace periods of only 20 days.
  • Can I File For Bankruptcy With $35k In Credit Card Debt

    Filing bankruptcy should be looked at as a last-resort scenario, but, in some cases, it can be helpful or even necessary to get back on your feet financially.

    There’s no minimum amount of debt you have to have before you can file bankruptcy, and the maximum amount of unsecured debt is in the hundreds of thousands of dollars. So it’s possible to file bankruptcy with $35,000 in credit card debt.

    Whether that’s a good idea, though, is another question entirely. Credit card debt is considered dischargeable, but the negative impact a bankruptcy is likely to have on your credit can be severe and last for years. As such, it’s crucial that you research the process and learn more about alternatives before you hire a bankruptcy attorney.

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    What Is The Difference Between Default And Bankruptcy

    Defaulting on a loan means that youve violated the promissory or cardholder agreement with the lender to make payments on time. Each lender has its own requirements on how many missed payments you can have before it considers you in default. In some cases, that may be as little as one missed payment or as many as nine missed payments.

    Filing for bankruptcy is a legal process that involves listing out your debts and assets and finding a way to resolve those debts. A judge will decide if any of your debts can be discharged and if your assets will be used to pay off the outstanding balance. The judge will also decide which assets youre allowed to keep and which can be taken from you.

    Default and bankruptcy usually go hand in hand. Many borrowers default on their loans and then subsequently file for bankruptcy.

    Things To Consider Surrendering Of Secured Assets

    How Long Does a Bankruptcy Filing Stay on My Credit Report?

    When you claim bankruptcy, you must surrender your assets, such as your home or your vehicle. This might not make sense if youve built up a fair amount of equity. For example, if you have $200,000 of net worth in your home, it doesnt make sense to give it up. Instead of filing for bankruptcy, youre likely better off with a consumer proposal, which allows you to hold on to your assets.

    An exception to this would be if you did not have sufficient equity in your home or your car. There is an allowable amount of equity by which you can maintain these assets, but it varies slightly in each province. For example, if you are the sole owner of a home in Manitoba, you are only permitted to hold onto $2500 of equity in the property. If you own a car in Alberta, the maximum value, or equity, is $5000.

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    Bankruptcy Is A Powerful Tool For Debtors But Some Kinds Of Debts Can’t Be Wiped Out In Bankruptcy

    By Cara O’Neill, Attorney

    If you’re facing severe debt problems, filing for bankruptcy can be a powerful remedy. It stops most collection actions, including telephone calls, wage garnishments, and lawsuits . It also eliminates many types of debt, including credit card balances, medical bills, personal loans, and more.

    But it doesn’t stop all creditors, and it doesn’t wipe out all obligations. For instance, you’ll still have to pay your student loans and arrearages for child support, alimony, and most tax debts. Read on to learn more about:

    • what you can expect in both Chapter 7 and Chapter 13
    • the benefits offered by Chapter 13 alone, and
    • things that can’t be accomplished by filing for bankruptcy.

    If you’d like step-by-step guidance through the bankruptcy process, read What You Need to Know to File for Bankruptcy in 2021.

    When The Trustee Pays Credit Card Creditors From The Bankruptcy Estate

    Most Chapter 7 bankruptcies are “no-asset cases.” There’s no property to sell for the benefit of the creditors. In the rare asset case, creditors will receive money according to a priority ranking system. Credit card debts–which are nonpriority claims–fall at the bottom of the list. So it’s unusual for a credit card company to receive any payment at all.

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    Your Bankruptcy Has To Be Discharged Before You Can Apply

    You cannot apply for any new lines of creditincluding a credit cardwhile your bankruptcy proceedings are in progress without court approval. The amount of time it takes to settle and complete your bankruptcy proceedings will determine when you can apply for a credit card.

    A Chapter 7 bankruptcy takes approximately four to six months after the initial filing to be completed and your debts discharged. After that, you can apply for a credit card.

    A Chapter 13 bankruptcy, however, can take between three to five years as its a restructuring of your debt that you pay off over time. Only after youve made your last payment will your bankruptcy be discharged. Until then, youll have to wait that entire period of time before applying for a credit card.

    Before Filing For Bankruptcy

    Bankruptcy Chapter 7 – Credit Cards

    Before you file for bankruptcy, get informed about this debt relief option and the others that may be available to you. Debt settlement programs, for instance, can help you eliminate your debt without forcing you to surrender your assets. Fill out the Canadian debt relief application for more information about your options.

    Also Check: When Is A Bankruptcy Removed From Your Credit Report

    Five Ways To Get Out Of Credit Card Debt

    In the throes of this recession, the average Americans is just piling on more credit card debt and finding it more difficult to find a way out. According to a report released by TransUnion, as of October 2009, the national average for credit card debt $5,612 per person. The average! Thats scary knowing that the job situation is only getting worse with at least one company announcing job losses at least every week.

    Can I File A Chapter 7 Bankruptcy Case Without An Attorney

    Bankruptcy attorneys help individuals who need debt relief file a bankruptcy case. However, the average attorney fee for a Chapter 7 bankruptcy lawyer can be $1,200 to $1,500. In addition to the attorney fee, you must also pay the filing fee to the bankruptcy court and the fees for your required bankruptcy courses.

    If you can afford to hire a bankruptcy attorney, it is usually best to do so. Bankruptcy law can be confusing when you are trying to file a Chapter 7 case without an attorney.

    You can file a bankruptcy case without an attorney and although itâs great to have an attorney, itâs not always necessary. If you canât afford to hire a lawyer, check if you’re eligible to use Upsolve’s free web app to prepare your bankruptcy forms

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    Could Anything Prevent Me From Being Discharged

    It is possible that your discharge could be opposed by a creditor, an LIT or the Superintendent of Bankruptcy. Generally, a bankruptcy discharge is opposed when the debtor has not fulfilled the requirements of the bankruptcy process. This might be due to:

    • Not making the required monthly payments
    • Failing to attend two mandatory credit counselling sessions
    • Committing an offence related to the bankruptcy claim

    There are a few other reasons why a bankruptcy claim could be opposed. For instance, if the bankruptcy was caused by gambling or if a creditor suspects fraudulent activity, it could be opposed by the creditor.

    If the bankruptcy discharge was opposed, the debtor would have to attend a court hearing to determine the conditions they would need to fulfil in order to be discharged from bankruptcy.

    Other Actions A Creditor May Take After Obtaining A Judgment

    Financial damage: Why waiting to file bankruptcy can hurt you

    State laws determine the legal steps a credit card company may take to collect a judgment debt. In some states, creditors are allowed to garnish your wages for judgments. Some states allow judgment holders to apply for supplemental proceedings to identify any personal property the judgment holder may seize to satisfy the debt.

    The actions the credit card company takes to collect a judgment debt depends on the company. Some credit card companies and debt collectors pursue judgment debts aggressively. Thatâs because they can afford to have full-time attorneys working on their behalf. In some cases, a person could lose a substantial portion of his or her income in wage garnishments or lose property to satisfy a judgment debt.

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    How Are Offences Discovered

    The Office of the Superintendent of Bankruptcy identifies possible offences through its detection programs or through complaints received from creditors, Licensed Insolvency Trustees or the public. Learn more about the rights and responsibilities of creditors, LITs and the OSB

    When the OSB has reason to believe that an offence has been committed, it sends the file to one of its three special investigation units. The investigation units work closely with the Royal Canadian Mounted Police . In some cases, files are transferred to the RCMP.

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    Is Chapter 7 Bankruptcy Right For You

    Make sure you know the difference between Chapter 7 bankruptcy vs Chapter 13 bankruptcy. Chapter 7 makes sense when:

    • You dont have many assets.

    • Your problem debts total more than 50% of your annual income.

    • Your problem debts can be discharged, or forgiven, by Chapter 7. These include debts such as medical bills, credit card debt and personal or payday loans.

    • It would take five years or more to pay off your debt, even if you took extreme measures.

    Some debts typically cant be erased in bankruptcy, including recent taxes, child support and student loans. Bankruptcy still may be an option for you, though, if erasing other kinds of debt would free up enough money to pay the debts that cant be erased.

    The other common form of consumer bankruptcy, Chapter 13, may be better if you have more assets or secured debts, and can repay some or all of what you owe.

    Other debt relief options are available, too, such as a debt management plan through a agency. Take advantage of the free initial advice that credit counselors and many bankruptcy attorneys offer before deciding on a path.

    How Much Does Bankruptcy Cost

    Filing bankruptcy on credit cards

    Another consideration is the cost of filing for bankruptcy. Filing typically costs a couple of hundred dollars, but hiring an attorney to represent you and protect your interests could cost a great deal more. Although individuals can act on their own behalf without an attorney, by going it alone you run the risk of losing certain rights or property. Generally speaking, because of their knowledge of bankruptcy law and experience with the courts, an attorney can be worth the money.

    After bankruptcy, you will probably find it difficult to get a credit card, except at a very high interest rate. One alternative is a secured card, where you put some money on deposit with the issuer.

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    Can You Declare Bankruptcy On Credit Cards Only

    While credit card debt is a major reason people wind up filing for bankruptcy, you cannot file for bankruptcy on credit card debt alone, as the law requires that all your debts be listed in the bankruptcy documents. However, because bankruptcy can eliminate credit card and other unsecured debts, filing will often put you in a better financial position that allows you to keep your home.

    Keeping a house is a major concern for most people filing for bankruptcy in Ohio, and there are several ways that bankruptcy can allow you to keep your house while discharging unsecured debt such as from credit cards. You will be able to keep your home if you can meet the requirements of the bankruptcy chapter that you choose, whether Chapter 7 or Chapter 13.

    Bankruptcy laws are complicated, and our Ohio bankruptcy lawyer can help you choose the correct chapter and increase the chances of your being able to keep your home, car, and other assets. The skilled and compassionate Ohio debt relief attorneys at Fesenmyer Cousino Weinzimmer understand that even the most well-intentioned people can find themselves in financial difficulty.

    Filing Bankruptcy On Credit Cards

    Filing bankruptcy typically gets rid of all credit card debt. Most credit card debt is unsecured debt. Unsecured creditors do not hold a lien on collateral to secure the debt. Therefore, if a creditor wanted to try to collect on credit card debt, the creditor would need to file a debt collection lawsuit, obtain a monetary judgment against you, and petition the court for a wage garnishment order or levy. Not all states permit wage garnishments. Furthermore, most states exempt certain assets from being used to repay judgments. Filing Chapter 7 or Chapter 13 should get rid of credit card debt under most circumstances. However, it that is the only reason you are filing for bankruptcy, you may want to consider non-bankruptcy alternatives to get rid of credit card debt.

    Also, if credit card debt is the only debt you owe and your state does not permit wage garnishment, you may want to discuss the matter with a bankruptcy lawyer before filing Chapter 7 or Chapter 13. If the debt is small and the creditor will not be able to enforce a judgment, filing bankruptcy might not be the best option for you. Most bankruptcy lawyers offer free consultations. You can get several legal opinions to help you make the best decision for you. If you have other debts, high credit card debt, your state permits wage garnishments, or you have substantial assets, filing bankruptcy for credit card debt might be the best way to wipe out debts and protect your property.

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    Will I Be Able To Get A Credit Card After Bankruptcy

    Believe it or not yes. Creditor companies often send debtors offers for credit cards after they filed for bankruptcy knowing that it will be 8 years before they can file for bankruptcy again. Additionally, bankruptcy will illuminate all of your unsecured debt making your debt to income ratio more attractive to lenders who see that you now have the ability to take on new debt. This is not to say that filing for bankruptcy is good for your credit, because it is not. However, consumers emerging from bankruptcy commonly receive offers for cards in the mail very soon after their bankruptcy case has closed. For more information see: Can You Keep a Credit Card After Filing for Bankruptcy?

    Chapter 7 Bankruptcy And Credit Card Debt

    5 Ways You Can Rebuild Your Credit After Bankruptcy

    When you file for Chapter 7, most of your debt can be discharged. However, Chapter 7 requires you to give up all of your non-exempt property. The trustee will sell the property and use the money to pay off creditors. Most credit card debt is viewed as non-priority, unsecured debt, so its discharged with Chapter 7. Tax debts and child support are two examples of priority debts, which cannot be discharged with Chapter 7 bankruptcy.

    Although it doesnt make sense in most situations, its possible to file for Chapter 7 and reaffirm all debts except for credit card debt. In this situation, an individual is liable for reaffirmed debts when the bankruptcy is finished.

    Read Also: How Do You Declare Personal Bankruptcy


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