Credit card debt can be frustrating because of the high interests rates and penalties involved. It can also be very difficult to keep track of all the payments you owe if you have multiple credit cards. No sooner do you make one payment than interest and penalties accumulate on the same or another card. But credit card debt is also one of the easier debts to discharge through bankruptcy. An experienced Montgomery bankruptcy attorney can guide you through Chapter 7 or Chapter 13 bankruptcy to make sure your debts are discharged.
Most credit cards are not secured with any sort of collateral, so if you fail to make payments, the creditor cannot repossess your property or foreclose on your house. The debt they create is considered “unsecured.” The creditor can ask the court to garnish your wages, however, which can be difficult to deal with. Some cards are “secured” cards; examples of this are certain credit cards from stores such as consumer electronic or furniture stores, which are secured by the items you buy from that store.
Chapter 7 and Chapter 13 bankruptcies are designed to deal with consumer debt, particularly unsecured debts. A Chapter 7 bankruptcy can lead to a discharge of the debts described in your bankruptcy petition within 3-4 months. Chapter 13 bankruptcy requires you to reorganize your debt to make paying it off more manageable. Once you have met your obligations under your debt repayment plan in Chapter 13, however, any remaining credit debt will be discharged.
In many Chapter 7 cases, a debtor does not have many assets or property worth a sufficient amount to be worth the bankruptcy administrator’s efforts to sell it off. To the extent that you do have enough money or equity in your assets, this will be liquidated to pay creditors based on the priority of their claims. Because they usually aren’t secured, credit cards are typically considered non-priority claims. These will be paid on a pro rata basis if there is any liquidity to pay them, such that each creditor gets the same percentage of its claim. Once your credit card debt is discharged in Chapter 7 bankruptcy, you are no longer liable to pay it back.
In a Chapter 13 bankruptcy, you agree to reorganize and repay some percentage of your credit card debt in 3 to 5 years. At the end of the process if you are successful, your debt will be discharged. The bankruptcy court will want to see that your debt repayment plan is appropriate for your income and assets. This means that if you own more valuable assets, you may have to pay off more of your credit card debt to obtain a bankruptcy discharge than would somebody who has less income and assets. Those who successfully complete the debt repayment plan approved by the court will have their credit card debt discharged.
Experienced Alabama bankruptcy lawyer Charles Grainger can evaluate your credit card and other debt to give you advice about long-term solutions that are tailored to your particular situation. We serve clients in from our offices located in Montgomery, Prattville, and Troy, Alabama. Call us at (334) 260-0500 or contact us online to schedule a consultation.