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How is credit card debt handled in bankruptcy?

Filing for bankruptcy is an option available for individuals who have no other way to pay off overwhelming debts. Under Chapter 7 or Chapter 13 bankruptcy, you can discharge eligible debts so that you have the opportunity you need to liquidate assets or form a repayment plan that helps you get back on your feet.

It is important to know that bankruptcy treats secured and unsecured debts differently. If credit card debt makes up a significant portion of your outstanding obligation, you can plan the best way to proceed by understanding how the bankruptcy process will handle these debts.

Will bankruptcy discharge your credit card debts?

The bankruptcy process sees most credit card debts as unsecured, meaning that filing for bankruptcy will discharge them. In the case of Chapter 7 bankruptcy, you will then liquidate your nonexempt assets and repay your debts on a priority basis. Chapter 13 bankruptcy also entails repaying creditors according to priority, but you will have a set period of time in which to do so in accordance with your court-approved repayment plan.

When does bankruptcy not discharge credit card debts?

Credit card debts that you take on as a result of fraud or other false pretenses are not dischargeable through bankruptcy. Credit card companies can also challenge a debt discharge, which they may attempt to do knowing that you may be exempt from repaying a discharged debt in full.

Credit card debt is often unsecured and low-priority compared to other debts from which you might seek reprieve through bankruptcy. This means that you can discharge many credit card debts without repaying them in full, according to the discretion of your trustee or repayment plan.


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