Bankruptcy to Get Rid of Credit Card Debt

Bankruptcy can help you eliminate credit card debt.

If your credit card debt has become unmanageable, you may be eligible to file for bankruptcy. Bankruptcy can help you get rid of credit card debt by reducing or eliminating balances, fees and interest charges.

The Facts

A personal bankruptcy may be filed under either Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. The bankruptcy court will evaluate your income and assets to determine which chapter of bankruptcy you are eligible to file under.

Types

A Chapter 7 bankruptcy will allow you to discharge your credit card debt while a Chapter 13 bankruptcy will reduce balances and fees that you owe. Chapter 13 bankruptcies require individuals to participate in a repayment plan to get rid of debt.

Time Frame

Chapter 7 bankruptcy proceedings can be completed within four months. Chapter 13 bankruptcy proceedings, however, can take up to five years to completely get rid of your credit card debt.

Considerations

If a credit card debt is older than your state's statute of limitations for debt, you are no longer legally obligated to repay the amount. This may make filing for bankruptcy unnecessary.

Warning

You may not be able to eliminate credit card debts that you accrued within 60 days of filing for bankruptcy. Your creditors can contest recent charges by claiming that you made purchases with the intent of filing for bankruptcy later to eliminate your obligation to the debt.

References

• U.S. Courts: Chapter 13
• U.S. Courts: The Discharge in Bankruptcy
• Carl Levin: GAO Report on Credit Card Debt Collection Problems Highlights Need for Consumer Financial Protection Agency

Resources

• IRS: Bankruptcy Tax Guide
• FTC: Information on Bankruptcy Alternatives