Credit Cards, Bankruptcy, and Court Wars

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Credit Cards, Bankruptcy, and Court Wars

Credit card is the most common unsecured debt in today’s world. As per one of the reports published during late 2017, an average credit card holder could have a yearly debt of $18,000-20,000. The interest rate of credit cards is really high, and it could even breach 30% in certain scenarios. The bankruptcy laws however beneficially help in scrapping the credit card dues as they are part of unsecured dues while you are struggling to keep up with basic needs and priority debts.

But it might not be as easy as said, the lender (credit card company) and the bankruptcy trustee try to squeeze the maximum out of the bankrupt person for minimizing their losses or bad debts. The credit card company may challenge the release of credit card debt and one might have to submit substantial evidence regarding the use of credit card to prove the credit card company incorrect. The best practices and ways of evading credit card debt during bankruptcy can be understood further.

The entire process of bankruptcy

Bankruptcy can be availed as per Chapter 7 and Chapter 13. In both cases, you get ‘automatic stay’ which keeps the lenders at bay for lawsuits, foreclosures, repercussions, and other money collecting modes. This phase is active until the bankruptcy lasts. Under Chapter 7 bankruptcy, you exchange all your assets which are not exempt to the bankruptcy trustee to clear maximum portion of your debt. Under the bankruptcy exemptions, many bankruptcy filers can protect most of their assets. To learn how you can check for detailed info.

On the other hand, Chapter 13 bankruptcy is a plan to pay the maximum amount of your dues keeping your income, expenses and disposable income into account. Most Chapter 13 filers end up paying a small portion of their credit card bills or medical bills and the liability never comes back. The downside to this small payment to the unsecured debts is that the bankruptcy trustee and the lenders have several objections. The common appeal by them is to prove the credit card transactions as fraudulent and hence, exclude the same from the release of unsecured debts.

How to counter the credit card company claims?

The common claim by the credit card companies is with respect to the credit card application. The bank might claim that the credit card application submitted was fraudulent and incorrect. The second most common claim is with respect to the willful default or the credit card was used with the intent to not pay. There is no way to determine a person’s intentions, but financial statements can act as evidence for converting the unsecured debt to a fraud transaction. The following are red triggers for the court to doubt your intentions with the credit card-

  • You used your credit card for buying luxury items just before the bankruptcy
  • If you had bought your credit card recently just before announcing bankruptcy
  • If you had made big purchases immediately after getting a new credit card
  • Getting cash advances immediately after getting a credit card
  • The credit limit utilization across the credit cards and
  • Use of one credit card to pay bills of the other

How to overcome the credit card lender claims?

Each scenario is different, and it is difficult to analyze common evidence the credit card company might support their appeal with. The best solutions for getting credit card debt released can be listed below-

  • Avoid using the credit card for at least 90 days before filing the bankruptcy
  • Try settling the issue with your credit card lender outside the court as the cost of lawsuit and procedure is expensive and lender also does not want to waste effort and time on that. So, a viable solution between you and the credit card lender is the need of the hour sometimes
  • Provide documents and proofs that make you capable enough to repay most of the credit card dues sooner than later

There is no harm in taking specialized help from the professionals if you are expecting to file bankruptcy in the near future. It helps you stay ahead of potential problems. Reach out for best professional help right now at +1 (888) 297 6203.