Bankruptcy is a last resort option for most people facing financial problems. When you do make the hard decision to file bankruptcy, it is important to consult with an experienced Stockton bankruptcy attorney to determine what type of bankruptcy is right for you and how filing will help you get out of your difficult financial predicament.
One common question that people have when filing for bankruptcy is what type of debt it will clear – mainly, whether it will clear credit debt. In most cases, the bankruptcy court will discharge credit card debt in bankruptcy. In addition to medical bills, credit card debt is one of the leading causes of bankruptcy filings in the United States. The average American has approximately $7,000 in credit card debt. Having a high amount of credit card debt causes significant financial strain, especially in a rough economy.
Bankruptcy Courts Generally Discharge Credit Card Debt
A primary reason most individuals file for Chapter 7 bankruptcy is to discharge or wipe out credit card debt. In most cases, the bankruptcy court will wipe out most or all of your obligation to pay the balance of your unsecured credit card debt, which will go away at the end of your case.
Exceptions to Credit Card Debt Discharge
Bankruptcy courts will wipe out most credit card debt, but there are a few exceptions to the rule. Creditors have the right to challenge the discharge of your credit card debt on certain grounds. One main ground for the challenge is fraud. If the bankruptcy court determines that you fraudulently charged your credit cards, creditors can ask the court not to wipe out your credit card debt.
Bankruptcy courts will also not discharge debt that is secured by collateral. Most credit cards are based on unsecured debt. However, in some cases, your debt may be secured through collateral. Some examples include credit card debt for furniture, mattresses, jewelry, or large appliances. Your Central Valley bankruptcy attorney can check your contract to determine whether your credit line is secured by collateral or not.
Call an Experienced Central Valley Bankruptcy Attorney
If you are considering Chapter 7 bankruptcy, it is in your best interest to consult with an experienced bankruptcy attorney to help you learn your legal rights and options, especially with respect to Chapter 7 bankruptcy.