Chapter 7 and Credit Card Debt

According to the Federal Reserve, Americans have racked up a record-breaking $1.04 trillion in credit card debt. The Federal Reserve also found that 60% of debtors do not have the means to pay off their balance every month. This results in hundreds of dollars in interest payments and irritating calls from creditors.

You may want to consider filing for Chapter 7 bankruptcy if your credit card debt is becoming overwhelming. You may be granted a fresh financial start by having the debt discharged, though the process is not easy. Take the first step in gaining financial freedom and speak with a bankruptcy attorney today.

Bankruptcy Attorney in Dallas County

Littlefield Law Firm has been helping clients seek relief from credit card debt for nearly 25 years. Our firm is 100% devoted to bankruptcy law, and we are standing by to answer any of your legal questions. Take advantage of our free consultation. Call (972) 812-0900 to schedule a time to speak with us.

Littlefield Law Firm helps clients with bankruptcy proceedings in Dallas County, Collin County, Kaufman County and Rockwall County. 

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 Does Chapter 7 Discharge Credit Card Debt?

One of the main benefits of Chapter 7 bankruptcy is the discharge of certain debts; credit card debt being one of them. A discharge is a court order that relieves you of the obligation to pay debts. By filing, you also are protected by the automatic stay which prohibits debt collectors from contacting you in any way. You can take legal action if a debt collector contacts you after your credit card debts have been discharged. 

Most credit card debts are unsecured. Unsecured creditors are last in line to collect after bankruptcy and often times they end up with pennies on the dollar if they get any compensation at all. But there are rare situations were such debt has a security interest, or lien, on your property. You can still wipe out this type of credit card debt, but the creditors will still be entitled to the property securing the obligation.

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When is Credit Card Debt Not Discharged?

Most credit card debts can be discharged in Chapter 7 bankruptcy, but there are a few exceptions. A creditor can challenge the discharge of your credit card obligations. The debt will not be discharged if the judge agrees, and you will remain responsible for making payments.

The court may decide not to discharge credit card debt in the following situations:

  • You obtained the credit card through fraud
  • $750 or more of luxury goods or services were purchased within 70 days of filing for bankruptcy
  • $1,000 or more of cash loans or advances were taken within 90 days of filing for bankruptcy
  • The credit card debt was incurred from embezzlement, larceny or breach of trust
  • The credit card debt was incurred from malicious behavior

Contact a bankruptcy attorney right away if a creditor or trustee is trying to revoke your credit card debt. An attorney can represent you in court and fight to have the request dismissed.

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Signs You Should File for Bankruptcy

Credit card debt is a major burden for most Americans. In fact, Value Penguin found that 85% of American adults are actively trying to pay down this obligation. There comes a time when the burden of credit card debt becomes too much, and you start to consider filing for bankruptcy.

Deciding to file for bankruptcy is not an easy decision to make, but if you are struggling with credit card debt, it may be in your best interest. Listed below are a few signs it may be time to speak with an attorney about filing for bankruptcy: 

You are being sued or harassed by credit card companies

Credit card companies or their agents will try to make frequent contact once you stop making credit card payments. The harassing calls and letters will become more frequent the more delinquent you are on payments. The constant calls from debt collectors is what causes most debtors to seek Chapter 7 relief. 

A credit card company or its agent may take their collection efforts to the next level and decide to file a lawsuit against you to collect your debts. The credit card company may be able to garnish your wages or go after your assets if they are successful in obtaining a judgement. 

You Cannot Afford to Pay Back Your Debts

One thing to consider when contemplating Chapter 7 bankruptcy is whether you can afford to pay off your credit card debt. You may not qualify for Chapter 7 if you make enough to make payments. You should consider Chapter 13 if this is the case. 

Credit card companies may be willing to negotiate with you and settle for a debt less than the full balance. You may also be able to lower your interest rate and combine your credit card debts into a single loan through debt consolidation. However, bankruptcy may be the best options if you will still struggle with debts after taking these steps.

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Additional Resources

Credit Card Habits of Americans | Value Penguin – Read an article from Value Penguin discussing the credit card habits of Americans. You can view charts and graphs over things such as the percentage of Americans with credit card debt by age, the percentage of Americans who are unable to pay off their credit card debt and the percentage of Americans with credit card debt by region. 

Chapter 7 Bankruptcy | United States Code – Follow the link provided to read the federal statutes governing Chapter 7 bankruptcy. You can find out how a trustee is selected; how certain liens are treated and learn more about discharge. The statute can be read on the Legal Information Institute website, an online legal resource provided by Cornell Law School.

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Bankruptcy Lawyer in Dallas

It’s advised you speak with an attorney before you file for Chapter 7 bankruptcy. Linda Littlefield strives to provide quality legal representation at an affordable price. She will evaluate your financial situation and ensure Chapter 7 is right for you. Grant yourself peace of mind. Call (972) 812-0900 to schedule a time to speak with Littlefield Law Firm.

Ms. Littlefield assists clients in areas such as Dallas, Plano, Kaufman and Rockwall.

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