What You Need To Know About Discharging Credit Debt
There are often challenges to a bankruptcy discharge by credit card issuers under §523(a)(2). These issuers can file for an adversary proceeding by claiming there was fraud, which entitled it to exclusion from the discharge. We sometimes refer to this as a “nondischargeability action.”
Credit card debt may be nondischargeable in bankruptcy under either of two legal theories:
- There was the submission of a fraudulent application to receive the credit card.
- Use of the card was without any intention to repay.
The latter theory is far more common following the 2005 Bankruptcy Code amendments. Now, we see creditors contesting such discharges of debt in Chapter 13 and Chapter 7.
Card Issuer Objections
The most likely circumstances for credit card issuers to bring nondischargeability actions include:
- Notable activity on credit cards shortly before a bankruptcy filing
- Applying for a new card in the weeks or months before a filing
- Taking out cash advancements just prior to filing
- Significant use of the credit card for items like vacationing
- Using one credit card to pay off debt for another credit card
- Surpassing credit card limits
- Use of credit cards while unemployed or while suffering financial shortages
- Having a significant balance at the time of the filing
- Continuing to use the credit card after retaining a bankruptcy lawyer
The longer the period between the use of the card and a bankruptcy filing, the less likely there will be any challenge to the discharge.
Options Available To You
Bankruptcy is a complex area of law. It is inadvisable to pursue options on your own. A knowledgeable bankruptcy attorney can help you determine the best available options for your personal circumstances.
Learn More About Your Bankruptcy Options In An Initial Consultation
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