How The Credit Card Company Challenges The Dischargeability Of Your Debt
When you file bankruptcy, your credit card company will look at your transaction history to see if you made any large purchases before you filed. If it finds evidence of fraudulent activity, it can file a lawsuit against you in your bankruptcy, called an adversary proceeding asking the court to make that debt nondischargeable.
If you donât respond to the lawsuit, the credit card company will obtain a default judgment against you, and the debt will not be discharged. If you do respond, you will likely have to spend thousands in legal fees defending it, and despite paying all those legal fees, you might still lose and have to pay back the credit card debt as well.
Because of the high cost of litigation, most people who are faced with an adversary proceeding for fraud negotiate to repay the debt, sometimes for a lesser amount.
Bankruptcy Without An Attorney And Credit Counseling
While the process involved in eliminating credit card debt through bankruptcy is not difficult, it always is risky to represent yourself in a legal matter without an attorney.
If you do not have experience with the paperwork and timing involved in filing a bankruptcy case not to mention knowledge of the sections and sub-sections of the law that apply specifically in your case you would be doing yourself a grave disservice in not hiring a bankruptcy attorney to represent you.
One of the major qualifying conditions for filing, is taking a pre-bankruptcy credit counseling course within 180 days of filing for bankruptcy. You can fulfill that obligation by speaking with a credit counselor from a nonprofit credit counseling agency.
At the very least, the counselor can look at your financial situation during a session and offer any alternatives to bankruptcy that might solve your financial problems, thus negating the need to file bankruptcy.
Chapter 7 is a potential source of relief and that is what it is designed to be. If you are an honest, but unfortunate debtor youve run up debt because of job less, medical debt or just trying to provide the basics for you family and you just cant do bankruptcy lets you hit the reset button.
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How Can I Get Credit Cards Or New Credit After Bankruptcy
- Make sure your credit report accurately reports your bankruptcy. This may seem like something you dont want to do, but it helps. Your credit report should show a $0 balance for any accounts that have been discharged through bankruptcy. Raise a flag with the credit reporting agency if any of your discharged debts are shown as active, and get it corrected.
- Keep paying non-discharged debts on time. Sometimes, not all your debts will, or can be discharged by your bankruptcy such is the case with student loans. Make sure you pay the remaining balances on time.
- Avoid credit repair companies. Some companies claim they can remove a bankruptcy from your credit report. This is simply not true. They will most likely take your money, and youll get little or nothing in return. Get new credit. Securing new credit is one of the biggest hurdles to get over in post-bankruptcy credit repair, but its also one of the most critical steps to rebuilding your credit. Some credit cards approve applicants who have a bankruptcy because they know that by law, you cant declare bankruptcy again for at least another seven years or more.
There are retail, gas cards, and secured cards that tend to have lower qualification standards than other unsecured cards. These loans and cards will come with more restrictions and higher interest rates than you could get with better credit. Still, they open the door for you to start rebuilding your credit reputation.
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A Creditor Making You Bankrupt
Your creditors can present a creditor’s petition if you owe them an unsecured debt of over £5,000. This may be the sum of two or more debts which total over £5,000. There might be different petitioning creditors on the same petition for different debts you owe.
Once bankruptcy proceedings have started, you must co-operate fully even if it’s a creditor’s petition and you dispute their claim. If possible you should try to reach a settlement before the petition’s due to be heard – doing it later can be difficult and expensive.
Comparing The Best Credit Cards After Bankruptcy: Annual Fee
Of our three chosen cards, only the OpenSky® Secured Visa® Credit Card requires users to pay an annual fee of $35.
This is relatively low compared to non-secured credit cards, which can charge anywhere from $95 to over $500 for their annual fee. However, if you are annual-fee-averse, you may want to stick with the other cards on this list.
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Filing Bankruptcy After Luxury Purchases
If you used your credit card for any of these types of items, you might have to pay for them in your bankruptcy case. Federal bankruptcy law presumes that if you buy luxury items and they all add up to more than $725 during the 90-day period before you file bankruptcy, you cannot discharge the debt. Similarly, if you take out cash advances that total more than $1,000 over the 70-day period before filing bankruptcy, the court will presume that you cannot discharge this debt. So if the credit card company fights your bankruptcy and you spent these amounts within the specified time, the court will likely agree and force you to repay the debt. Keep in mind that this is considered “presumptive” fraud. Regular fraud–when you purchase things without any intention or ability to repay–isn’t limited to the 90 days before bankruptcy.
The presumptive amounts are scheduled to change April 1, 2022.
Will The Credit Card Company Let You Keep Credit Card
Most credit card agreements have a term, which says that if you file for bankruptcy, then they can close the account.
The credit card company almost always has the right to cancel the account at their sole discretion.
In my experience:
- Sometimes they cancel the card automatically when you file bankruptcy, but
- Sometimes they dont
It really depends on the policies of the lender.
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What Types Of Credit Card Charges Can I Make Before Bankruptcy
Your credit card company generally will not fight your bankruptcy if, before filing, you use your credit card only sparingly and only for necessities. Necessities are items you absolutely need — things like groceries, diapers, gas for your car to go to job interviews, emergency repairs to a furnace in the winter, and baby food and formula. Essentially, necessities are basic things you and your family need to survive and maintain your health and welfare.
Restrictions On Obtaining Credit During Bankruptcy
Obtaining credit during bankruptcy can be challenging. If you file for a Chapter 7 bankruptcy, you can apply for credit as soon as the debt is discharged. With Chapter 13 bankruptcy, you will need to receive prior approval from the court or Chapter 13 trustee. Additionally, your plan payment must be current at the time of the request.
If you would like to get new credit during your Chapter 7 or 13 bankruptcy case, you should consult an experienced Cleveland bankruptcy attorney at Luftman, Heck & Associates. We will explain your situation to you and help you understand obtaining credit during bankruptcy.
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Chapter 7 Bankruptcy For Credit Card Debt
Chapter 7 bankruptcy is good for those who are looking to wipe out, or discharge, significant portions of their debt, credit card or otherwise. Luckily, credit card debt is one of the most easily dischargeable debts. Because credit card debt is considered unsecured debtthat is, it has no collateral backing like a mortgage or car loanmost if not all of it can be eliminated in Chapter 7 bankruptcy.
When you file Chapter 7 bankruptcy for credit cards, a bankruptcy trustee may liquidate your assets to pay off your creditors, but credit card collectors are usually at the bottom of this list. For this reason, in most cases you wont have to pay your credit card creditors.
To qualify for Chapter 7 bankruptcy for credit card debt, you will need to prove that you earn less than the median monthly income in your area. Or, prove that you cannot afford the amount of your debts in spite of earning income above the median. This is called the bankruptcy means test.
Can I Exclude Credit Cards In My Bankruptcy Filing
When you file for bankruptcy, you will need to list all the credit cards you have, even those with zero balance. The bankruptcy court will then notify all of your creditors that you filed for bankruptcy, and in some cases, creditors will withhold borrowing privileges immediately for the debtor.
Excluding debt is not an option when filing for Chapter 7 bankruptcy. Bankruptcy laws require debts to list all of their debt on the bankruptcy petition. Even if you dont owe a balance on a credit card, you are still required to include it in your bankruptcy papers.
When you submit your bankruptcy petition, all contracts will be canceled, including credit cards, leases, and secured car loans. Since all contracts are automatically canceled, credit card companies will need to cancel the cards since they cant enforce ongoing obligations without a contract in place.
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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.
When The Credit Card Company Alleges Fraud
If the credit card company alleges fraud associated with your credit card this may affect the automatic stay. If you obtain a discharge from debt when your case is closed the automatic stay ends. At this point you will no longer be responsible for the debt. Questions or concerns should be reviewed with a qualified bankruptcy expert.
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Bankruptcy Discharge What Happens Next
If you declare yourself bankrupt, or youre declared bankrupt, youll usually be discharged 12 months from the date the bankruptcy order was made.
The discharge process is automatic and will usually come to an end after a year. However, if youve not cooperated and been completely honest with your official receiver or trustee, or youve not acted responsibly during your bankruptcy, it might not end at this time. This is known as a delayed discharge or suspended discharge and can extend your bankruptcy for up to 15 years.
Once youve been discharged from your bankruptcy, youll be free of some of the financial restrictions imposed by the order, meaning:
- You can now act as a company director, unless there is another reason why you cant hold that position.
- You no longer have to worry about any assets, pay rises, bonus payments or other windfalls being used to pay creditors. An exception to this is any payment protection insurance mis-selling compensation payments, from claims made before your bankruptcy.
Its worth noting that you wont be sent confirmation of your bankruptcy discharge, but you can get proof of your discharge by getting a free confirmation letter by calling discharge queries on 0300 678 0015.
Here are some useful next steps for after bankruptcy:
A Bankruptcy Question From A Debtcom Reader
Question: In 1997, I declared bankruptcy after a terrible divorce. I was doing fine until I got laid off a few years ago. My problem is, when Im under stress, I like shopping therapy. It never really works but I keep doing anyway.
Even though I have a wonderful new job, it doesnt pay what my old one did, and I have more than $20,000 on various credit cards. Im getting angry calls from debt collectors, and the stress is making me lose my hair literally!
So Im considering bankruptcy again. I hear the law has changed, but its hard to figure it out by searching the Internet. Can you give me some advice?
Vanessa in Tennessee
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Your Creditors May Hold A Meeting
Sometimes, a meeting of creditors is required or requested. The purpose of this meeting is to
- allow creditors to obtain information about the bankruptcy
- confirm the appointment of the LIT
- appoint up to five inspectors to supervise the administration of your estate and
- allow creditors to give direction to the LIT.
If a meeting is called, you will be required to attend.
Howard Dvorkin Cpa Answers
More so than any other financial topic, bankruptcy is both complicated and depressing. Think about it: Mortgages are also complex, but after you navigate the process, you own a house!
Bankruptcy, however, is simply a fresh start, says the federal government. Unfortunately, the governments explanation of the process isnt exactly user-friendly its called Bankruptcy Basics, but it looks like this. Not very basic, is it?
So here are three crucial things to know, Vanessa
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Do You Qualify For Chapter 7 Bankruptcy
To qualify for Chapter 7 bankruptcy you:
Must pass the means test, which looks at your income, assets and expenses.
Cannot have filed a bankruptcy petition in the previous 180 days that was dismissed because you failed to appear in court or comply with court orders, or you voluntarily dismissed your own filing because creditors sought court relief to recover property they had a lien on.
Adversary Proceedings For Credit Cards In Bankruptcy
If a lender accuses you of fraud in bankruptcy, they will need to file a notice of adversary proceedings. This step is mandatory if a credit card company wants to challenge the dischargability of credit cards in bankruptcy based on fraud. There are very specific time-frames involved for a credit card company to file this notice. If the claim is not timely filed, the creditor may be barred from challenging the discharge of credit cards in bankruptcy.
The court looks at several factors when deciding whether or not there is fraud for the credit cards in bankruptcy. The bankruptcy judge will look at the following factors, but it is important to remember that not one single factor is outcome dispositive. The judge will look at all of the facts relevant to these factors before making a decision.
The court will evaluate: the length of time between the charges and the bankruptcy filing whether or not an attorney had been consulted concerning the filing of bankruptcy before the charges were made the number of charges made the amount of the charges the financial condition of the debtor at the time the charges were made whether the charges were above the credit limit of the account whether the debtor made multiple charges on the same day whether or not the debtor was employed the debtors prospects, whether there was a sudden change in the debtors buying habits and whether the purchases made were luxuries or necessities. See In re Dougherty.
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How To Rebuild Your Credit After Bankruptcy
The credit reporting bureaus reward people who can responsibly handle the mix of credit that most households maintain, which includes one or two unsecured credit cards, a car loan, and a secured credit account, such as a furniture or jewelry store card. Car loans, furniture accounts, and jewelry store cards are “secured” accounts because you must promise to give back the merchandise if you fail to make your payments. Once you have the right mix of credit, of the utmost importance, of course, is making timely payments.
Each month, you’ll want to pay your balances down to 10% to 30% of your available creditâbut not pay off the card. Paying off your entire balance triggers the credit card company to pull your credit, and every time that happens, your credit takes a hit.
There is another reason why it’s not a good idea to use more than 30% of your available credit: The amount of credit available on your account strongly influences your credit score. For instance, your credit score will be much higher if you have $3,000 in available credit as compared to only $300.
Tips For Filing Bankruptcy On Credit Cards
Here are some important tips for filing bankruptcy on credit cards:
- Dont make any major purchases on your credit cards in the 60-120 days before you file bankruptcy. The court frowns on any filer who runs up significant debt buying large-ticket items shortly before filing, in hopes of having this debt discharged along with all their other debt. If a judge believes you intentionally ran up debt to scam the system, the judge may reinstate this debt and you will still owe it after the bankruptcy is over.
- Be sure to list every single debt you have on your bankruptcy filing including every credit card, with account numbers. If you forget and leave one credit card off the list, you will likely still owe this debt even after filing bankruptcy. Thoroughness is key.
- Destroy all plastic credit cards after your bankruptcy is complete. You dont want to misplace the physical cards, even if the accounts are defunct. To get a fresh start, cut up the cards and dispose of them.
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