Credit card debt is a huge problem for many families struggling to pay the bills. The high interest rate and excessive fees make it nearly impossible to pay off the debt. Fortunately, many borrowers can find relief and get a fresh start with a Chapter 7 or Chapter 13 bankruptcy. Bankruptcy can put an immediate end to the harassing collection notices and eliminate the credit card debt.
For many, bankruptcy is the best solution when credit card debt is out of control. You may be able to wipe out all the credit debt without even paying a portion of what is owed. However, bankruptcy is not right for everyone, you should consult with a bankruptcy lawyer in Tampa for advice about your specific case.
Credit Card Debt in Bankruptcy
Credit card debt in bankruptcy is almost always treated as an unsecured debt. Unsecured debts are loans that are not secured by collateral. Collateral is something used to establish trust for a loan; the typical example is when one uses a home as collateral for a mortgage. Because there is no collateral needed for most credit cards, the debt is treated as unsecured. Unsecured debts, such as credit cards, are typically discharged without having to pay even a portion of the debt.
Discharge of Credit Cards in Bankruptcy
If a debt is discharged in bankruptcy, the borrower will be released from personal liability on the debt. Further, the discharge prohibits a creditor from taking any collection action against the borrower. Therefore, if your credit card debt is discharged, the debt owed will be wiped out. Banks are not allowed to call you, send bills, or take any other action to collect on a debt that was discharged.
Credit Card Judgments
If a credit card company is successful in suing, they will receive a judgment. At this point, the company suing you is likely a debt buyer and not the credit card company that you originally owed. The judgment holder will likely be charging interest and their legal fees as they pursue collection. In many cases, the interest and legal fees will be more than the original loan amount. See Florida Statute 55.145.
Under Florida law, most judgments are valid for 20 years. See Florida Statute 95.11. Therefore, the creditor has 20 years to continue to attempt collection. The creditors may even be allowed to garnish your paycheck, take money from your bank account, and put liens on your property. Even worse, courts allow the garnishments to begin before the borrowers even receive notice.
Garnishments from Credit Cards
Once they obtained the judgment, they can move forward with garnishing a borrower’s wages. If your wages are being garnished filing for bankruptcy may be the quickest way to stop the garnishment. Immediately after a Chapter 7 or Chapter 13 bankruptcy case is filed, an automatic stay will be enacted. The automatic stay requires all collections efforts to immediately stop, including garnishments. Additionally, you may be able to discharge the credit card judgment in Chapter 7 or Chapter 13 bankruptcy.
Credit Cards with Allegations of Fraud
It is important to hire a bankruptcy attorney to prevent being accused of fraud in a bankruptcy case. If a lender successfully proves fraud, the credit card debt may be ineligible for discharge. This process usually starts with the creditor challenging the discharge based on the belief the debt was incurred through fraud. Fraud is a defense against dischargeability for credit cards in bankruptcy. For credit card fraud, the creditor will need to prove one of two things: (1) that the card was obtained through fraud, such as falsified information on an application; or (2) the use of the card itself was done fraudulently. If you think a lender may have a claim of fraud, contact a bankruptcy law firm for legal advice right away.
Adversary Proceedings for Credit Cards in Bankruptcy
If a lender accuses you of fraud in bankruptcy, they will need to file a notice of adversary proceedings. This step is mandatory if a credit card company wants to challenge the dischargeability of credit cards in bankruptcy based on fraud. There are very specific time-frames involved for a credit card company to file this notice. If the claim is not timely filed, the creditor may be barred from challenging the discharge of credit cards in bankruptcy.
The court looks at several factors when deciding whether or not there is fraud for the credit cards in bankruptcy. The bankruptcy judge will look at the following factors, but it is important to remember that not one single factor is outcome dispositive. The judge will look at all the facts relevant to these factors before making a decision.
The court will evaluate: (1.) the length of time between the charges and the bankruptcy filing; (2.) whether an attorney had been consulted concerning the filing of bankruptcy before the charges were made; (3.)the number of charges made; (4.) the amount of the charges; (5.) the financial condition of the debtor at the time the charges were made; (6.) whether the charges were above the credit limit of the account; (7.) whether the debtor made multiple charges on the same day; (8.) whether the debtor was employed; (9.) the debtor’s prospects, (10.) whether there was a sudden change in the debtor’s buying habits; and (11.) whether the purchases made were luxuries or necessities. See In re Dougherty.
Contact a Bankruptcy Law Firm in Tampa
At Florida Law Advisers, P.A., we understand how stressful credit card debt can be. That is why we work so hard to make the case as easy as possible for our clients. We will help ensure your rights are protected, keep you well-informed every step of the way, and help you receive the utmost protection bankruptcy can offer. Regardless, if you need help with Chapter 13, Chapter 7, or other debt relief our professional legal team will provide you with the competent legal advice you can trust. To schedule a free consultation with a bankruptcy attorney in Tampa, call us at (800) 990-7763.
Frequently Asked Questions
While some banks may be skeptical about extending credit so soon after bankruptcy, some retailers may be more willing to do so. Retailers (such as gas stations, for example) will often have less restrictions for new applicants in comparison to the big banks.
Most unsecured debts are discharged in Chapter 7 bankruptcy. Unsecured debts are loans that don’t have collateral, such as credit card bills. The debts are eligible to be discharged regardless if you are current on the monthly payments or not.
Most unsecured debts are discharged in Chapter 7 bankruptcy. Unsecured debts are loans that don’t have collateral, such as credit cards. The credit cards bills are eligible to be discharged regardless if you are behind on the monthly payments or current.
Each type of debt relief provides its own unique benefits and disadvantages. You should consult with an attorney to see which type of debt relief would be best for your specific situation.
Unfortunately, banks usually reserve the right to cancel credit card accounts at any time. Therefore, they can close your account regardless if you file bankruptcy or not. Additionally, you will likely not be able to force a credit card company to keep the account open if they insist on closing it.
Most unsecured debts are discharged in Chapter 7. Unsecured debts are loans without collateral, such as credit cards and medical bills.
Homestead property (primary residence) is an exempt (protected) asset in Chapter 7. Therefore, you may not have to forfeit your home as a condition of the bankruptcy.