Discharging Your Personal Credit Card Debt Through Bankruptcy

Before filing for bankruptcy, there are a few things you need to know. There are many types of bankruptcy and not all of them discharge all of your credit card debt. Let’s examine some important bankruptcy facts that you should be aware of.

First, there are several types of bankruptcy, the most common being:

– Chapter 7
– Chapter 11
– Chapter 13

Chapter 7 bankruptcy is also known as a liquidation. Under this type of filing, all your assets are liquidated and distributed to your creditors.

Under Chapter 7, the credit card banks must work with the trustee to get repaid. Once a liquidation is finalized, lenders cannot pursue you for any outstanding debt. This type of bankruptcy protection can only be used every 7 years.

Chapter 11 bankruptcy is generally used for corporate filings, but may also be available to individuals who are self-employed or running their own businesses. This type of bankruptcy protection allows the businesses to continue running while re-structuring their debt to reemerge as a viable company. This is the type of bankruptcy corporations use and you read about in the headlines.

Chapter 13 bankruptcy does not liquidate your credit card debt, you must repay a large portion of what you owe. Under this type of personal bankruptcy, you get to retain your assets while working out a repayment plan with your creditors.

Under Chapter 13 bankruptcy filing, the court appoints a trustee who works with the debtor, the creditors and the court itself. During the repayment agreement the debtor is not allowed to open new accounts to incur new debt plus must get approval from the court to liquidate any assets. If any payments are missed, according to the plan agreed upon by all parties, a Chapter 13 bankruptcy protection may be converted to a Chapter 7 upon petition by any creditor.

You should know that not all debts are automatically discharged even in the case of chapter 7 liquidation. If the credit card company can demonstrate fraud on your part the debt can be excluded from the bankruptcy.

One important fact you should know is that Chapter 13 bankruptcy does not work 67% of the time. You should look for a better credit card debt solution to help you out of debt.

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