How Bankruptcy Removes Credit Card Debt Judgments

Filing Chapter 7 bankruptcy provides for discharge of certain debts.  Under Chapter 7 laws in almost every state, non-secured consumer debts such as credit cards are dischargeable under existing bankruptcy laws.

What Is a Chapter 7 Discharge?

Under Chapter 7 discharge laws, debtors can discharge unsecured debts.  An unsecured debt will almost always include credit card debt, which if unpaid at the time of the meeting of the creditors, will be include in the Chapter 7 discharge. 

Normally, sixty to ninety days following the meeting of the creditors, any outstanding unsecured debts remaining unpaid will be dismissed by the bankruptcy courts through discharge.  Having legal counsel before the bankruptcy process, however, is important.  Many debtor expectations regarding debt discharge are not correct, and in other cases, debtors may actually take action detrimental to future attempts to discharge an existing credit card debt.

Protections Afforded Debtors following Chapter 7 Discharge

Following the discharge, a debtor no longer has any legal obligation to repay a discharged debt.  Creditors, on the other hand, no longer have any legal right to continue any form of collections actions, wage garnishments, or other forms of liens, if the debt is deemed discharged during the bankruptcy proceedings. 

It is important for debtors to note that not all debts are dischargeable under Chapter 7 bankruptcy laws, but of the most commonly discharged debts, credit card debt is the most common.  It should also be noted, however, that Chapter 7 bankruptcy, otherwise known as liquidation bankruptcy, requires an accurate accounting of assets and liabilities.  These assets, if not exempt under bankruptcy laws, will be liquidated to repay creditor claims until funds deplete entirely.  At this point, all dischargeable debts are dismissed in most bankruptcy cases.

Protecting the Right to Discharge Credit Card Debts in Chapter 7

If a debtor obtains permission to file Chapter 7 from the bankruptcy courts, the ability to discharge non-secured debts, such as a credit card debt, will probably occur.  However, actions before and during the bankruptcy process may invalidate a Chapter 7 claim, and in turn, prevent the discharge.  Actions such as fraudulent misrepresentations to the bankruptcy trustee of assets or liabilities, as well as other misrepresentations during the bankruptcy process may invalidate claims after a bankruptcy discharge has been approved.

Creditors may also seek to invalidate discharge claims through noting intentional spending shortly before the bankruptcy proceeding. It is up to a bankruptcy judge to determine whether or not credit card spending was fraudulent, however, large sums of credit transactions immediately before a bankruptcy filing are often indicators seized upon by credit card companies indicating fraudulent use of credit cards. 

Furthermore, credit card debt incurred under fraudulent pretenses, or with no inclination to repay, may also not be dischargeable under Chapter 7 liquidation laws.

How to Get a Bankruptcy Completed Successfully

To ensure to success of any bankruptcy filing, a debtor must seek the assistance and guidance of competent legal counsel. Any bankruptcy case will require significant legal oversight, which if not present, could lead debtors to lose their rights discharge certain debts, including credit card debts, which are non-secured.

Talk to a Bankruptcy Lawyer to find out more about how bankruptcy works, the process, advantages, disadvantages and whether it's the right choice.