Can I get out of credit card debt in a New York bankruptcy?

Bad credit card debt is the most common problem facing most consumers considering bankruptcy today.  The good news is that in almost all cases your unmanageable credit card debt can be eliminated or extremely reduced in both Chapter 7 and Chapter 13 bankruptcies in New York.

With a Chapter 7 bankruptcy you will be able to eliminate your toxic credit card debt entirely.  The credit card companies are listed with your other creditors when you file for Chapter 7 bankruptcy protection.  Chapter 7 bankruptcy filers typically have no significant assets.  (My clients always keep their homes and cars through New York State exemption laws so do not consider your home or car to be at risk of being lost.)  In a no asset case, the court has determined that you do not have anything that could be sold off to satisfy your creditors.  If you were determined to have significant assets then the court may liquidate property in order to pay your creditors.  But generally speaking in a Chapter 7 any unsecured credit card debt will be treated like other claims and any money raised will be paid to creditors in order of priority.  Credit cards are non-priority claims in the eyes of the law, and non-priority claims rarely receive any payments whatsoever once the discharge is completed.

So in a Chapter 7 case, bad credit card debt is wiped out completely.  But this does not mean you should rack up your cards right before filing for bankruptcy.  Certain protections are given to credit card companies that would leave you responsible for that one last spending spree.  Purchasing luxury goods in excess of $600 on one card within 90 days, or making cash advances over $875 within 70 days of your bankruptcy filing are not typically discharged as there is a presumption of false pretense, i.e. you had no intention of repaying the debt.  “Consumer Bankruptcy Law and Practice” Volume 1 sec. defines luxury goods and services as those, “that are not reasonably necessary for the support or maintenance of the debtor or the debtor’s dependants.”  So a necessary repair for the home or even new washer or dryer and some new clothing for the kids in excess of $600 would not be considered luxury goods.  If you just bought some new jewelry or took the family on an expensive ski vacation then it is usually best to wait out the ninety days before filing for Chapter 7.  In a nutshell, with a Chapter 7 all of your bad credit card debt will be eliminated unless you intentionally rack up your cards within 90 days, and even then sometimes a case can be made that you made the purchases in good faith with the intention to repay the debt.  A qualified bankruptcy attorney will know how best to proceed with your particular case.

Choosing Between a New York Chapter 7 Bankruptcy and a Chapter 13 Bankruptcy

A qualified attorney will also know if you should file Chapter 7, or if you would be better served by filing for a Chapter 13.  Sometimes the best strategy may involve converting one type of filing to another, so working with an experienced and qualified firm is essential since often times the bankruptcy mills are happy to crank out Chapter 7 filings but may have little experience in converting between a Chapter 7 and 13 which in many cases can provide the best overall strategy and protection.

If your attorney advises you towards a Chapter 13 bankruptcy then you typically have significant assets that you would like to protect against liquidation.  In a Chapter 13 case the trustee will sign off on a repayment plan that will provide your creditors with a portion the past due debt that is owed.  Since credit card companies are not priorities under the law even with a Chapter 13 bankruptcy credit card companies will typically receive no more than 5% of what you owe to them.

If you live in New York and are consumed with bad credit card debt please call the Law offices of William Waldner at 212-244-2882 for a free bankruptcy consultation today.  We will rid you of the crushing credit card debt and get you on your way with a fresh financial start on day one.

This article is intended for educational purposes only. By reading this article no attorney-client relationship has been created.