If you are unable to make your credit card payments you may qualify to greatly reduce (Chapter 13) or completely eliminate (Chapter 7) your credit card debts through bankruptcy. If you have exempt assets and unsecured debts Chapter 7 is the most beneficial form of bankruptcy because it completely wipes away your unsecured debt obligations including your credit card debts. If you don’t qualify for a Chapter 7 bankruptcy proceeding, the option of filing for Chapter 13 protection may be available to you.
In a Chapter 7 bankruptcy, debtors are usually able to discharge (wipe out) credit card debts. Generally, credit card debts are treated like other unsecured claims in Chapter 7 cases. The Chapter 7 trustee may pay some of your credit card debt, along with other unsecured claims, in the unlikely event that your bankruptcy estate has enough money. In most cases, your obligation to pay the balance will be discharged upon successful completion of the case.
In a Chapter 13 bankruptcy a plan is created whereby you make a single monthly payment to the Chapter 13 Trustee over a 60 month period in full satisfaction of all of your credit card debt. The amount you actually pay to the Trustee pursuant to your plan often is substantially less than the full balance of all your credit card debt. Best of all, after your bankruptcy filing and during your plan repayment period no interest can be charged by the credit card companies.
Credit card debts, like most other unsecured obligations, are considered to be non-priority claims. It is very uncommon for non-priority creditors to receive any payment in Chapter 7 cases. Any payments that can be made are distributed on a pro rata basis, so that each unsecured creditor (including any credit card company) receives the same percentage of its claim – usually nothing, or at most, pennies on the dollar.
Credit card debt is one of the biggest reasons why most people think about filing for bankruptcy. It’s easy to get into debt especially when the economy is bad. Financial distress occurs when somebody faces unexpected medical costs, necessary home repairs or just day-to-day purchases piling up. High credit card balances are one of the types of debt that are usually discharged or wiped out by filing bankruptcy.
When you file for bankruptcy, one or more credit card companies may possibly file an adversary proceeding against you. This is when a creditor claims the debt you owe shouldn’t be discharged because you committed fraud in creating the debt, and so it wouldn’t be fair to the creditor if the debt is wiped out. Our firm can also assist in the defense of any adversary proceeding filed against you.
Bankruptcy was created to help relieve credit card debt. If you think you could use this kind of help, you may want to speak with McBreen & Kopko. A bankruptcy attorney can answer your questions and explain how the laws in your state may affect your credit card debt.
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