Credit Cards and Bankruptcy

If you’re like most Americans, credit card debt is probably one of the leading causes behind your decision to file for bankruptcy. Initially, credit cards are easy to get and to maintain, but with high interest rates and hidden fees, they can slowly take away your money and your ability to pay your bills on time. If you have experienced these types of issues with credit cards and are thinking of filing for bankruptcy, there are a few things you should know about how the two interact and affect one another.

First of all, you should know that you are not alone in your struggle with credit card debt. This is the most popular type of debt among Americans and it may occur due to overspending, incurring unexpected circumstances in life that keep one from being able to pay credit card bills on time or as planned, or a simple misunderstanding of how credit cards work and should be used. Many people think that filing bankruptcy will be an answer to the credit card trouble they have gotten themselves into, but this is not always the case.

If a credit card company is suspicious of your spending or feels that it has been wronged in some way, it may choose to file an “adversary proceeding.” If successful, this proceeding will mean that, regardless of the bankruptcy you have filed, you will still be responsible for paying off all credit card bills on your own. This can occur if you provided false or somehow misleading information on the initial credit card application or if it can be proven that you purposefully overspent on the card without intending to pay the amount back. Signs of misuse that credit card companies look for include going over your credit limit often or significantly, opening several different types of credit card accounts within a short period of time, using the card when you are without income or a way to pay the balance, and using the card in excessive amounts after or shortly before you have filed for bankruptcy or began consulting with a bankruptcy attorney. To avoid having this happen to you, be sure that you do not take part in any of the actions listed above and that you are always completely honest and open on any credit card application you fill out. Being denied a card will be better, in the long run, than facing the penalties for lying.

If no adversary proceedings are filed, then the Chapter 7 or Chapter 13 bankruptcy will include any credit card debt you may have. This can be a huge relief for those who feel as though they are buried under mounds of debt. In the future, providing you take steps to remedy your credit, you will likely be able to obtain another credit card. Before you do so, make sure you understand how credit cards work and how, when, and in what amounts they should be paid off.

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