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Credit Card Debt & Chapter 7 in California

Posted by David Gibbs | Dec 18, 2020 | 0 Comments

chapter seven

Contemplating filing bankruptcy is never an easy decision, but that choice gets much more complicated when you have multiple types of debt. Not all debts can be discharged in Chapter 7 bankruptcy so it's helpful to know upfront what you can likely expect. Deciding whether to file and how to file requires looking at your current debts and whether or not Chapter 7 would truly allow you a fresh start. 


One of the biggest reasons to file Chapter 7 bankruptcy in California is to eliminate existing credit card debt. In many of these cases, your responsibility to pay any remaining balance on the card is eliminated when your case is completed. The major exception to this is if any of the credit card debt was accumulated fraudulently. 


There are a few limited exceptions for credit card purchases or advances when determining if the debt will be eliminated. In a California Chapter 7 bankruptcy case, cash advances or purchases for luxury goods that happened within 90 days of your bankruptcy filing are presumed to not be discharged. Furthermore, if the debt in question is one that has another borrower, such as a cosigner on a credit card, that debt can remain for the other party even if one person does get credit card debt discharged in bankruptcy.


If you own any non-exempt assets at the time you file, the bankruptcy trustee can sell them  for the benefit of your creditors. However, creditors are paid out according to a priority system and credit card companies are at the low end of that priority ranking. For this reason, most credit card debt simply goes away when the Court grants a discharge in California. 


There are a few limited exceptions for expenses that the credit card was used for when determining if the debt will be eliminated. In a California Chapter 7 bankruptcy case, cash advances or purchases for luxury goods that happened within 90 days of your bankruptcy filing do not count. Furthermore, if the debt in question is one that has another debtor, such as a cosigner on a credit card, that debt can remain for the other party even if one person does get credit card debt discharged in bankruptcy.


For more questions about what can and cannot be discharged in bankruptcy, schedule a time to talk with our dedicated California Chapter 7 Attorney. 

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David Gibbs

Attorney / Owner

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