Types

• Consumers may file bankruptcy under either Chapter 13 or Chapter 7 of the U.S. Bankruptcy Code. Those that file under Chapter 7, providing for liquidation of the debtor's property, are often eligible for a full discharge of their credit card debts. In this case, the credit card company would be forced by the court to take a loss on the unpaid balance the individual owed. If the consumer filed under Chapter 13, which allows a debtor to keep property, she would be expected to repay most, if not all, of the credit card debt she owed using a court-ordered repayment plan lasting from three to five years.
  
  

Significance

• When the bankruptcy court absolves an individual of his obligation to repay his credit card provider, the credit card provider must write off the debt as a tax loss. It is no longer legally allowed to attempt to collect the debt from the individual. In some cases, if an individual cannot afford to repay his credit card debt in its entirety through the court-ordered repayment plan, the bankruptcy court may discharge only a portion of his debt. Thus, the credit card company would accept any payments the debtor made and discharge the remaining debt.
  
  

Considerations

• Not all credit card debt can be discharged through bankruptcy. In some cases, credit card providers may contest an individual's request to include her credit card debt in her bankruptcy petition. According to the Moran Law Group, If the consumer made purchases on her credit card without being employed and having a way to repay the debts, if the consumer charged high debts just prior to filing for bankruptcy or made any credit card purchases after speaking with a bankruptcy attorney, the credit card company may request that the court refuse to allow the consumer to include all or a portion of her credit card balance in the bankruptcy petition.
  
  

Time Frame

• Credit card debt takes approximately three months to discharge for individuals who file under Chapter 7. Some cases may take longer depending on the complexity of the case and the case load of the district in which it was filed. Chapter 13 cases disposes of credit card debts within a strict three to five year time frame. A Chapter 13 bankruptcy is not permitted to last any longer than five years.
  
  

Warning

• If an individual fails to meet the requirements set forth by the bankruptcy court, fails to produce the necessary paperwork for his case, fails to pay fees or neglects to show up for court hearings, the court may dismiss his bankruptcy petition. Credit card debt that was scheduled to be discharged will once again be owed by the debtor should the bankruptcy court dismiss his case. If the bankruptcy court arranged a repayment plan for the individual under a Chapter 13 bankruptcy, the credit card company does not have to allow the debtor to stick to that plan after his bankruptcy case is dismissed.