Credit Card Debt & Bankruptcy


Improper management of finances; especially the undisciplined use of credit cards is a large cause for financial imbalance, bad credit, and even bankruptcy. A person opting for Chapter 13 bankruptcy can pay off the credit card bills either in full or part by making regular monthly payments.

In Chapter 13 plan, the debtor makes regular payments to the trustee who in turn pays the creditors. The primary intention of the trustee would be to pay off all priority debts such as child support and alimony, employee wages, and tax obligations. Next, the trustee will pay the secured debts such as mortgages and vehicle loans. Finally, the payment plan shall include partial payments on unsecured debts such as credit cards and other bank cards. Usually, the repayment plan will be for three years. The judge may also extend it to five years according to circumstances. By the end of the repayment plan, the balance credit card debt amount shall be waived.

Immediately upon filing of the bankruptcy petition, all legal attempts by creditors to collect money such as collection calls and garnishment of wages will be stopped. However, credit card companies may approach the court and challenge discharges during bankruptcy hearings. The law provides that a credit card debt can be classified as non-dischargeable if it could be proved that the debtor applied for credit card by fraud or with a fraudulent intend; or that the debtor had no intention to repay the amount owed. The time between use of credit card or large cash advances, and filing for bankruptcy shall be considered as reasonable admission in bankruptcy cases.