Thursday, September 5, 2013

How to Get a Bankruptcy Discharge on Credit Card Debt

Credit card debts are unsecured debts that are dischargeable in bankruptcy. However, if the debt was incurred because of a non-dischargeable item in bankruptcy, it will not be forgiven by the courts. For example, if you paid a non-dischargeable tax obligation with a credit card, the credit card bill will not be discharged because the taxes are non-dischargeable.
Credit card bills are mostly wiped out in bankruptcy but the courts will also determine whether you made the purchase in good faith. The following are some of the factors which are going to be considered.

The court will scrutinize the status of your finances when you made the purchases using credit card. If it turns out that you could not possibly pay back the charged amounts, the court may presume that you used the card knowing that you could not possibly repay it. It will also be considered how many charges were made. In case there were more charges prior to the bankruptcy filing, it would appear that the debtor was attempting to abuse the bankruptcy.

The amounts you charged on your card will also be scrutinized. If the luxury items bought within the past 3 months prior to the filing exceed $600, the court may suspect that you defraud the credit card provider. Small amounts for basic needs are not usually scrutinized.

Your spending pattern will also be checked. If you want to file for bankruptcy should not change spending habit within the months leading to the bankruptcy; otherwise, you might find it hard to justify in court. Multiple purchases within a single day are going to be scrutinized as well. 

It is also a factor whether you had a job or income at the time you were using your credit cards. Your employment prospects will also be considered. If you have no job or income you should not be using the credit card. It will be seen as fraudulent when there is no logical expectation that the money owed will be paid back. Charges on basic necessities will not be scrutinized in general, while charges on luxury products or services will be a problem.

If most of your debts are credit cards, there is a chance that one of your creditors will file an adversary action and proceeding against you. This is where a credit card company claims that you should not be relieved from your obligation to pay. It is possible that a creditor may charge you of committing fraud in incurring the debt. The credit card provider might claim that it would be unfair if the debt is discharged. For this reason it is a good idea to see a bankruptcy lawyer before filing. 

The best way to steer clear of problems like these is to be truthful with your credit card use in the first place. Quit using your credit cards immediately if you really want to file bankruptcy. It is almost certain that if you accumulate large credit card bills within 2 to 3 months of declaring bankruptcy, that debt will not be discharged.

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