How Much Credit Card Debt Can Be Discharged in Chapter 7 Bankruptcy?
People who are overwhelmed by credit card debt find bankruptcy can be one way to get a fresh start. While there is no limit on the amount of money that can be discharged in Chapter 7 bankruptcy, there are eligibility restrictions, and credit card companies may challenge your right to wipe out your debt.
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Chapter 7 Bankruptcy
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Chapter 7 Bankruptcy allows individuals and married couples to wipe out most types of unsecured debt, including credit card debt. There is no limit on the amount of debt that can be wiped out in a Chapter 7 bankruptcy, though if your assets exceed exemptions allowed in your state, they may be seized to pay back some of what you owe to your creditors.
Qualifying for Chapter 7
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To qualify for Chapter 7 bankruptcy, you must meet certain debt and income guidelines, and you must undergo credit counseling. If your income is high enough, you may instead qualify for Chapter 13 bankruptcy which requires you to set up a payment plan with your creditors.
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Adversary Proceeding
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In some cases, a credit card company may challenge your right to wipe out your debt through a process known as an adversary proceeding by accusing you of fraud. For example, if you increased your use of credit right before filing for bankruptcy, the credit card company may argue that you deliberately used credit that you knew could be wiped out in bankruptcy. If this happens to you, your lawyer can advise you about settling with the credit card company.
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References
- Nolo.com: A Chapter 7 Bankruptcy Overview
- Moran Law Group: Evaluating Credit Card Discharge Issues
- Nolo.com: Will All of my Unsecured Debts be Wiped Out in Chapter 7 Bankruptcy?
- Nolo.com: When Chapter 7 Bankruptcy Isn't the Right Choice
- Nolo.com: The Bankruptcy Means Test: Are You Eligible for Chapter 7 Bankruptcy?
