One of the reasons that people consider filing for bankruptcy is to get relief from credit card debt. In most cases, a bankruptcy can help with this goal. Before filing for bankruptcy to get rid of credit card debt, here is what you need to know.
What Happens When You File for Bankruptcy?
After filing, you will receive one of the biggest benefits of filing. As soon as your papers are submitted to the court, an automatic stay is issued. The stay prevents the credit card companies from filing a lawsuit against you. The bankruptcy also keeps the credit card companies from calling and harassing you to pay your bills.
There is a catch to the stay though. The credit card companies can ask the judge to lift the stay so that they can pursue their legal options against you. If this happens and the credit card companies win a judgment against you, you could still end up having to pay off the debts.
Can the Credit Card Debt Be Discharged?
Credit card debts are considered to be unsecured debts. Unsecured debts are not backed up by collateral. As a result, you can have those debts discharged in a bankruptcy. If the credit card companies were able to get a judgment against you before the bankruptcy completed, there is a possibility that you can still get those debts discharged. However, if the companies also secured a lien against you for the debts you owe, they are not automatically cleared with the discharge.
In the event that there is a lien on your assets from the credit card companies, you will either need to pay off the debts or file a motion in court to have the lien removed. Whether or not the court removes the lien depends on a number of factors, including the value of the property and your state's laws.
It is important to note that even though most credit card debts are routinely discharged in bankruptcy, there is a possibility that the credit card companies will object to the discharge. You are required to meet with the bankruptcy trustee and your creditors prior to the completion of your filing. It is possible that the trustee agrees with your debtors and recommends that the debts stand.
Bankruptcy law is complicated and even more so when credit card debts are factored into it. For more information, contact Wade Bettis, J.D., Ph.D., PC or a similar legal professional.