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What happens to my credit card debt during bankruptcy?

On Behalf of | Feb 2, 2023 | Personal Bankruptcy |

Making the choice to file for bankruptcy can be scary, and you likely have valid concerns regarding what your financial situation will be like throughout the bankruptcy process. The process itself entails granting relief from payment obligations while you get a handle on your finances through asset liquidation or the formation of a repayment plan, but the circumstances surrounding credit card debt can differ.

Bankruptcy treats secured and unsecured debts differently, so it is important to know which category your credit card debts fall into so you can understand your payment obligations regarding those debts. Bankruptcy may even discharge certain credit card debts in a process outlined by the United States Courts.

Will bankruptcy discharge my credit card debts?

Most credit card debts are unsecured, meaning that the bankruptcy court will automatically discharge them unless a creditor proves a discharge to be invalid. In the case of Chapter 7 liquidation bankruptcy, the discharge typically occurs within four months of the first creditor meeting. For other types of bankruptcy, such as Chapter 13, credit card debts may undergo discharge immediately after the completion of all payments in their established repayment plan.

Which credit card debts does bankruptcy not discharge?

Debts incurred through the use of a secured credit card may not be eligible for discharge through bankruptcy. You will also continue to be liable for any credit card debts that are the result of fraud or other wrongful actions.

Going through the bankruptcy process means that you may have to significantly alter your lifestyle by way of liquidating many of your nonexempt assets or by adhering to a strict repayment plan. Bankruptcy can be an effective way to get your back on your feet, though, especially when you consider that many of your credit card debts may be eligible for discharge.


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