Can credit card debt be discharged in bankruptcy?

By Marrero, Chamizo, Marcer Law, LP,

Excessive credit card debt can lead to financial stress and harassing calls from collection agencies. Many of these collection agencies provide misleading information that may lead consumers to believe that filing bankruptcy is no longer an option for getting rid of credit card debt.

In reality, bankruptcy is still the best way to get rid of excessive credit card debt. Consumers generally have two bankruptcy options: Chapter 7 and Chapter 13.

Chapter 7 bankruptcy is the simplest and quickest way to get rid of credit card and other debt. Chapter 7 bankruptcy provides 100 percent discharge of credit card debt, medical debt, payday loans, and many other types of unsecured debt. If you are eligible, you can be debt-free in as little as three to six months.

If you are not eligible for Chapter 7 bankruptcy because your earnings are too high or you have filed Chapter 7 bankruptcy within the past eight years, Chapter 13 bankruptcy may be an option for you. Chapter 13 would also be the best option if you own property that creditors can take, such as a vacation home.

When you file Chapter 13 bankruptcy, the bankruptcy court will look at your income, your assets and your debts and then determine how much of your credit card and other debt you can repay over a three- to five-year period. Secured debts such mortgage payments must be repaid in full. For unsecured debts such as creditor card bills, you pay only what the court determines you can afford to pay. Often this is a small percentage of what you owe. At the end of your payment plan, any remaining credit card debt will be discharged.

A bankruptcy attorney can help you determine which form of bankruptcy protection is best for you based on your income, your assets and your debts.

For some consumers, bankruptcy alternatives such as debt consolidation or negotiation can reduce credit card debt to a manageable amount. Unfortunately, for most people, these options are both expensive and ineffective. Only bankruptcy offers tax-free discharge of debt and the full protection of state and federal bankruptcy laws.