Chapter 7 bankruptcy is a last resort that gives individuals and families a second chance at catching up on overwhelming bills and debts. Sometimes known as “liquidation bankruptcy,” Chapter 7 discharges your unsecured debts and puts a stay on required payments while you liquidate unnecessary possessions and build a plan for catching up financially.
The United States Courts define discharge in bankruptcy as a release from liability for certain types of debts. While certainly not all of your debts are eligible for discharge, you might wonder how the Chapter 7 bankruptcy process will affect your credit card debt.
Will Chapter 7 bankruptcy discharge your credit card debts?
Most credit card debts are unsecured, meaning that they are eligible for discharge as part of the bankruptcy process. When filing for Chapter 7 bankruptcy, you will liquidate all nonexempt assets and then build a plan for repaying your secured debts and as many of your unsecured debts as possible. If at the end of your bankruptcy period you still have outstanding credit card debts, you will no longer need to pay them as per the discharge.
When does Chapter 7 bankruptcy not discharge credit card debts?
Certain types of credit card debt are not dischargeable. Specifically, you will continue to be liable for debt taken on as a result of fraud or false pretenses. You might also have to pay some or all of a debt if the credit card company successfully challenges and overturns the discharge.
Chapter 7 bankruptcy affects credit card debt insofar as it considers these debts to be low-priority. This means that you may receive a reprieve from paying some or all of your credit card debt after filing for bankruptcy, depending on the terms of your repayment plan.
