Credit Card Debt In Chapter 7 Vs. Chapter 13

Credit card debt is a huge problem with Americans today. In fact, the average person in this country owes $6,354 in credit card debt. Many people owe a lot more than this, though. If you are thinking of using bankruptcy for help eliminating the credit card debt you have, it is important to understand the differences with how credit card debt works in Chapter 7 bankruptcy versus Chapter 13.

Chapter 7 Eliminates It If It Qualifies

The reason people prefer Chapter 7 bankruptcy when they have mounds of credit card debts is due to the way it eliminates the debt. Credit card generally falls into the category of qualifying debt in a Chapter 7 case, which means filing for this branch will wipe it away. You will lose your credit cards when you file, but you will also have zero balances. You will be out of debt.

Chapter 13 Requires Repayment

If you use Chapter 13, it works differently when it comes to credit card debts. Credit card debts are not considered priority debts in Chapter 13, but you will have to pay some of the balances or all of the balances. You will have a payment plan to follow. It will pay off priority debts first, such as child support and mortgage arrears, but it may also pay off some or all of your credit card debt.

Chapter 13 Might Forgive Remaining Balance

When you complete a Chapter 13 plan, the good news is that it may wipe out any remaining credit card debt you have. In other words, if you still owe money on your credit cards when you complete the plan, the trustee could forgive those balances. This is a common occurrence with Chapter 13 cases, so you should consider this if you are thinking about filing.

Neither Branch Helps with Credit Card Fraud

The last thing to know is that there are guidelines to follow when it comes to using your credit cards prior to filing for bankruptcy. If you do not follow these guidelines, your actions could be considered fraudulent. If this occurs, you would not receive any help from bankruptcy for the credit card debts you have, and you could even face legal problems if the trustee feels that you intentionally tried committing fraud.

If you are curious about how bankruptcy could help you with the financial issues you have, you should talk to someone who offers law services to learn more about this.