Wipe Out Debt

Clearing Credit Card Debt With Bankruptcy

Edited by Bryan Keenan

If you’re constantly worrying about your credit card debt, read this…

Managing credit card debt, particularly if you have debt on multiple credit cards, can be very stressful. As late charges and huge interest rates mount, you may find yourself wondering how you’ll ever pay the balance on your cards. If you can’t keep up with minimum payments, you may face a lawsuit and eventually have your wages garnished.

Most credit cards create unsecured debt. This is the type of debt for which a creditor is unable to repossess your property or other items if you fail to pay it. The reason is that such creditors do not hold a security interest in any property as collateral for the money they lend you.

An example would be if you were to purchase a television from a store like Best Buy using a Best Buy credit card. Here, the lender (Best Buy or its agent, etc.) would have the legal right to recover that television after non-payment. However, let’s assume the same television was to be purchased using a “regular” credit card (Mastercard/Visa, etc). Here, the lender would not be able to recover the television for non-payment of your credit card balance. This would hold true before or after you file for bankruptcy.

Of course, while the law may allow a creditor such as Best Buy the legal right to recover your television for non-payment, as a practical matter, they probably would not do so since it would not make sense from an economical standpoint, especially if you have filed for bankruptcy, whether as a Chapter 7  or as a Chapter 13. After all, what is Best Buy going to do with a used television set?

Personal bankruptcy is an effective way of dealing with credit card debt that deepens over time while your income remains the same. A Chapter 7 bankruptcy can eliminate MOST or ALL your credit card debt.

Why Chapter 7 Bankruptcy Is The Best Solution For Your Credit Card Debt…

A Chapter 7 bankruptcy can eliminate existing credit card debt entirely, as well as eliminate the late fees or interest you may owe on the cards. This holds true even if one or more credit card companies have sued and obtained a judgment against you for the nonpayment, or even if one has garnished your wages.

In many Chapter 7 cases, there are no assets or property in the bankruptcy estate that can be liquidated to raise enough money to pay creditors. However, if there is enough money or equity in assets to pay creditors, they are paid in order of priority. Credit card debts are usually nonpriority claims, and if any payments are made to the nonpriority claims, they are paid on a pro rata basis so each creditor receives the same percentage of its particular claim.

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About the author

Bryan Keenan

Attorney Keenan is a familiar face with the Bankruptcy Court Judges, trustees and practitioners in the state of Pennsylvania, and has handled thousands of consumer bankruptcy files. Attorney Keenan takes pride in keeping up with the constant changes to the local and national bankruptcy rules." Prior to becoming a lawyer he worked as a paralegal for ten years, and, therefore, he has worked in this field for the past 22 years.

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