Borrowers who qualify for Chapter 7 bankruptcy can discharge the debts relating to their credit cards. Usually, credit card-related debt is viewed by bankruptcy courts as unsecured debt in Chapter 7 matters. The court-appointed bankruptcy trustee in these cases will use liquidated capital to pay off a portion of the outstanding credit card debt, in addition to other unsecured debt claims — but only there is sufficient capital left over after addressing the secured debts in the borrower’s debt portfolio.
The majority of Chapter 7 matters qualify as “no-asset” cases. In a “no-asset” case, nothing can be sold off to pay off debts. Conversely, in a case that involves assets that can be liquidated, the bankruptcy court will use liquidated assets to pay off debts in a special order of priority. Credit card debt — since it is unsecured — is considered non-priority debt, and usually credit card companies will receive nothing as the result of Chapter 7.
Once the Chapter 7 liquidation process is completed, and as much of one’s debts have been paid back as possible, the remaining debts will generally be discharged; however, in certain cases, it might not be possible to wipe away everything related to credit cards. For this reason, it is important to have one’s debt situation reviewed by an experienced bankruptcy attorney before beginning a Chapter 7 filing.
At the Fort Lauderdale-based offices of the Cohen Law Firm, we help Florida residents file for bankruptcy. However, before we will agree to represent a new client in his or her claims, we will perform a free, initial consultation in order to discuss the individual’s current debt situation to determine the most appropriate solutions to his or her financial problems.