What Happens to Credit Card Debt with Bankruptcy?
It's safe to say that a lot of people have a lot of credit card debt. This form of credit is far too easy to get and difficult to handle for some. If your financial situation is deteriorating, chances are credit card use played a part. To find out more about this form of credit and what happens when the debtor files chapter 7 bankruptcy, read on.
Why Are Credit Cards So Sneaky?
These little plastic cards and the way they work are not always fully understood by users. It might take a while for some to realize that paying only the minimum required on the cards each month results in interest charges on the balance. That means consumers don't realize one harsh truth until it's too late: even though credit cards are easy to use and you don't have to immediately pay off the balance, you end up paying pay a lot more than is required in the long run.
The Good News About Credit Card Debt
If there is any good news about credit cards, it's that they can be listed on a chapter 7 bankruptcy and completely discharged, in most cases. Credit card debt is known as unsecured debt, which means that no property was used to procure the card and none is in jeopardy when you don't pay it. As soon as you file for bankruptcy, you need never make another payment on any card. Also, you won't have to deal with calls and letters about past due payments either.
Be Cautious, However
Because they are so easy to use, consumers should be warned about accidentally perpetrating fraudulent credit card activity right before they file for chapter 7 bankruptcy. Creditors will review your use of the card in the months before you file to make sure that you were not misusing the card while planning to file bankruptcy. Here is what to watch out for:
- As long as you use the card for something you really need, you can do so. That means using it for food, fuel, utilities, basic clothing, work items, repairs, etc. That doesn't mean using it for luxury designer goods, spa visits, vacation trips, and other frivolous items in the 90 day period before filing.
- If you go over a certain agreed amount on a single card, you might have to explain why.
- If you take out a cash advance totaling a certain amount on any combination of cards, you may find the advances won't be discharged.
If you have misused your card, speak to bankruptcy attorney services about putting off the filing for a few months to avoid the appearance of fraud. Speak to the lawyer to find out more.