Does Chapter 7 Bankruptcy Wipe Out Credit Card Debt?

As you may know, it is far too easy to fall behind on your credit card bills. After paying the minimum each month, expecting to slowly chip away at these expenses, you may discover that the debt has started to pile up. It is for this reason that you, and countless others, have been left wondering what you can do to regain control of unruly credit card debt. Depending on the level of debt that you have incurred and the type of financial resources that are available to you, this can be remedied in a number of ways. For example, smart financial planning and strict budgeting can be an effective way to eliminate small amounts of credit card debt. If you are past this point, however, you may need to consider other options – like filing for Chapter 7 bankruptcy.

If you qualify, Chapter 7 bankruptcy can be an effective solution to your debt-related problems. Not only will it allow you to eliminate most, if not all, of your unsecured debt, but it will offer you the protections of an automatic stay – which would prohibit creditors from contacting you. This means that you can initiate the debt relief process without the added worry of creditor harassment, wage garnishment or home foreclosure. Then, once your bankruptcy case has been completed, you would be able to move forward with a fresh start. You would no longer need to worry about repaying credit card debt, medical bills or other unsecured debts, as they would be wiped out during the Chapter 7 bankruptcy process.

The only reason why the court may choose not to discharge this debt is if:

  • You purchased luxury goods – If you use a credit card to purchase luxury items ($650 or more) within 90 days of filing for bankruptcy, a judge may see this as an attempt to defraud the court. For this reason, you should refrain from making large purchases if you have decided to file for bankruptcy.
  • You took out a cash advance – If you use a credit card to take out a large cash advance ($925 or more) within 70 days of filing for bankruptcy, the court can choose not to discharge this debt. For this reason, you should avoid incurring any new debts that you would be unable to repay before filing for bankruptcy.

If you have questions about how your credit card debt will be treated during Chapter 7 bankruptcy, we encourage you to contact a Chicago bankruptcy lawyer at our firm today for a free consultation. You can either call our office at (312) 957-8077 or submit a free case evaluation form online.