Discharging Credit Card Debt in Michigan

Is bankruptcy the only way to wipe out credit card debt?

For millions of Americans, repaying credit card debt is an endless battle. If you too are struggling to keep your head above water, it is important to understand that you have options. While filing for bankruptcy is an effective way to wipe out unmanageable debt, there are numerous other ways that you can regain control of your finances. For example, strict budgeting and strategic planning is a good way for you to start chipping away at your credit card debt. If that is not enough, our Michigan bankruptcy lawyer may be able to assist you in negotiating a settlement with the bank or the issuer of your credit card. If you are really in over your head, however, you may want to consider filing for bankruptcy.

How Credit Card Debt is Treated in a Chapter 7 Bankruptcy

If you are unable to get a handle on your credit card debt, Chapter 7 bankruptcy may be the financial solution that you are looking for. Through this debt relief process, you would be able to discharge most, if not all, of your unsecured debt—which means that you would be absolved of the responsibility to repay your overdue credit card bills once the bankruptcy process is over. During Chapter 7 bankruptcy, your non-exempt assets would be liquidated and the proceeds would be used to repay your creditors in order of priority. Since credit card debt is low on the scale, it is unlikely that the credit card company will be repaid at all. However, the court can choose not to discharge these debts if:

You purchased luxury goods on a credit card

  • If you use a credit card to purchase "luxury goods" or services within 90 days of filing for bankruptcy ($650 or more), a judge can choose not to discharge the debt—as this could be seen as an attempt to defraud the court. However, this excludes any goods or services that are reasonably necessary for the support of you and your dependents (i.e. food, gas and clothing).

You used a credit card to take out a large cash advance

  • If you use a credit card to take out a large cash advance within 70 days of filing for bankruptcy ($925 or more), the debt will be considered "nondischargeable." It will not matter whether or not you used the money to purchase luxury items, as you will still need to show the court that you intended to repay the debt when you incurred it.

Will I repay credit card debt in a Chapter 13 bankruptcy?

Unlike Chapter 7 bankruptcy, Chapter 13 requires you to reorganize your debt and develop a suitable repayment plan—which will be executed over three to five years. You will be asked to repay creditors in order of priority, so whether or not you are able to repay your credit card debt will depend on the type and amount of all other debts that you have incurred. For example, you would first be required to repay all secured loans and priority unsecured debts before touching your credit card debt. If, at this point, you can afford to repay more of your debt, you will be required to do so. Any unsecured debts that have not been repaid at the end of your bankruptcy will be discharged by the court.

Contact Our Firm for a Free Consultation: (888) 258-0651

If you are interested in discussing your case with a Michigan bankruptcy attorney from the Hensel Law Office, PLLC, we encourage you to contact our firm today for a free consultation. Evening and weekend appointments are available – call today at (888) 258-0651 to schedule a meeting.