According to various studies, credit card debt is the reason behind up to 66% of personal bankruptcies. Other research suggests that the 500% increase in individual bankruptcies between 1980-2004 is at least partly related to credit card debt. Read further to learn about credit card debt’s effects on a bankruptcy case.
Credit Card Debt Issues
For many years, it’s been easy to get a credit card-;even if an individual has less than perfect credit. If one does not manage debt responsibly, it can get to the point where it would be impossible to pay off. For example, a $1000 debt can take more than nine years to fulfill if one only pays the minimum each month. On average, a person filing for bankruptcy has 60% more debt from credit cards than anyone else.
How a Bankruptcy Can Help With Card Debt
Many people face enormous amounts of credit card debt and decide to hire bankruptcy attorneys in Baltimore because cardholder agreements don’t give creditors the right to any of the cardholder’s assets if they can’t repay the debt. Credit card debt isn’t secured by collateral, only by the cardholder’s promise to pay. In a Chapter 7 bankruptcy, unsecured debts are liquidated. In a Chapter 13 case, debtors set up repayment plans that can last up to five years, using all their disposable income to pay creditors. After the repayment plan ends, all remaining unsecured debts are wiped out.
Fraudulent Credit Card Debts Can’t Be Discharged
Credit card issuers and court-appointed bankruptcy trustees can challenge credit card debt discharge if the debt involves fraud. Commonly challenged situations include:
• Accruing a significant amount of debt immediately before a bankruptcy filing
• $750+ in cash advances or $500+ in luxury items within seventy days of filing for bankruptcy
However, court-appointed trustees commonly ask debtors for explanations as to why a filing includes a substantial amount of card debt. Answers that don’t include events beyond the debtor’s control usually lead to additional questioning and research by trustees, who can find abuse in situations that don’t meet the standards for fraud. If one wishes to file for bankruptcy, they should consult bankruptcy attorneys in Baltimore if their case includes significant credit card debt.
