Credit Card Debt & Bankruptcy
- The Department of Justice conducted a study in 2000 trying to determine if there was any correlation between filing bankruptcy and credit card debt. One thousand people were examined and it turned out that more than 50 percent of the households filing for bankruptcy had credit card debt in excess of $10,000.
- Before filing for bankruptcy, you might consider going to a consumer credit counseling service. There are many reputable organizations ready to help you, but you should also know there are some credit counseling services that do not have your best interests in mind. Some credit counseling services are actually paid by the credit card companies, which means that although they appear to be representing your best interests, they are actually representing the interest of the credit card companies. If you feel the company has misrepresented itself to you, you can file a complaint with the Federal Trade Commission.
- For most consumers, bankruptcy means filing a Chapter 7 bankruptcy. In this kind of bankruptcy, some of the debtors property can be sold off to pay back a percentage of the creditors and debts such as credit card debts are erased. However, if the debtor earns too much money, he might be required to file a Chapter 13 bankruptcy. Under a Chapter 13 bankruptcy, instead of credit card debts being erased (as happens with a Chapter 7), a repayment plan is set up over a period of time.
- Credit card companies can go to court and challenge discharges during bankruptcy hearings. Under the law, credit card debt can be rendered non-dischargeable if the credit card company proves that the application to get the card was fraudulent or if the card was used without any intention of providing payback. A court might find that if you suddenly ran up all your credit card accounts immediately before filing for bankruptcy that you intended to avoid paying the credit card companies. The longer the time is between when the credit card was used and when bankruptcy was filed for, the less likely it is that you didn't intend to pay the credit card company.