Credit Card Bankruptcy
The overwhelming debts from the credit card users are the main reason for a person filing bankruptcies. Besides once a person miss to pay for the debt the interest goes on mounting like a rocket and reflects all over the person's finance. The best way to avoid bankruptcy from credit card usage is to use the credit card with care. Avoid unnecessary purchasing on credit cards, payments for which are not possible for you to make in the near future.
Also there are issues on whether the debts from credit card can be discharged or not. The credit card holders are sometimes challenged by the creditors by filing an adversary proceeding for the discharge of the debts. They may proceed saying the card was issued to a person who showed himself capable of repayment using fraud documents. This action of credit card issuers is called "non-discharge ability action."
A court may deny the discharge of credit card debts for two reasons
- If the credit card holder submitted fraud data to the credit card issuer to gain he card.
- The card holder used it intentionally knowing he is not able to pay or not going to pay the debt.
Under chapter 13 no such issue arises as the debts under fraud cases are also dischargeable. So a person with credit card fraud generally files under chapter 13 bankruptcy.
Credit card issuer generally goes for challenging the debts in following scenarios
- A person who has decided to file a bankruptcy and uses the credit card to the maximum before filing.
- When a newly issued card is used to the fullest.
- Large amount of cash advance in a few months before the person files the bankruptcy.
- Using the card while traveling or vacations before filing.
- Payments of others are made by burrowing from the other cards. In this case the pattern is studied and if found doubtful, the credit card issuer might challenge the card holder, etc.
Way Outs
- One must always take care that there should not be substantial use of the credit card when one is thinking of filing bankruptcy. An easy way out is to keep some time gap between heavy usage and filing to avoid unwanted challenges on dischargeable assets and debts.
- One can always settle things with the credit card issuer by conversations.
- Also when the credit card issuer is not listening, one can shift to chapter 13 bankruptcy.
Other useful links
[Bankruptcy Chapter 7] | [Bankruptcy Chapter 13]
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