Filing for bankruptcy can be an incredibly overwhelming process, as there is a considerable amount of paperwork you must file. However, you may be so concerned with ensuring the paperwork is correct that you forget one considerable aspect of this process – what will happen to your credit cards after filing. Unfortunately, many are unsure what to expect, so understanding your legal options is critical. The following blog explores what you must know about credit cards and bankruptcy. Additionally, you’ll learn why working with a Memphis, TN credit card debt lawyer is in your best interest during this complicated process.
What Happens During Bankruptcy?
When you file for bankruptcy, you are essentially telling your creditors that you can no longer repay the debt they have extended. As such, this initiates a process in which you will pay back as much as possible, while the remaining eligible amount is dismissed. Generally, there are two different chapters you can pursue as part of your filing.
The first option is to file a Chapter 7 bankruptcy. This is a process in which you will declare bankruptcy, and your non-exempt property will be liquidated. The funds received from liquidation will be used to repay your creditors. You should note that in order to pursue Chapter 7, you must meet the minimum income requirement by taking the means test. This essentially compares your average annual income to other households of the same size in your state. If you fall below the average, you are eligible to pursue this Chapter.
The other option you can pursue when filing for bankruptcy is Chapter 13. This is a process in which your debts are combined, and you make one monthly payment to the bankruptcy trustee assigned to your case. The trustee then distributes the funds to your creditors. This process will last between three and five years, depending on your circumstances. At the end of your case, your remaining eligible debts will be discharged, and your case will close.
Is Debt Accumulated on Credit Cards Dischargeable?
When you file for bankruptcy, you may worry about what will happen to your credit cards during this process. First and foremost, when you file, you must list any credit cards with a balance as a creditor during this process. You should note that this often results in the cancellation of your cards.
It is important to note, however, that even if you have a credit card with no debt, meaning a $0 balance, your card will likely be canceled. Bankruptcy filings are public records, and credit card companies monitor the information of their cardholders to ensure they are in good standing. Even if you owe no money, the credit card company will likely discover your filing and cancel your card as a result.
Generally, credit card debt is considered dischargable, as it is unsecured. As such, whatever balance remains at the conclusion of your case will be discharged, meaning you are no longer legally responsible for making payments to your credit card issuer for the debt accrued in your name, as bankruptcy has legally cleared your obligations.
If you need help navigating bankruptcy, working with an attorney is critical. At the Arnold Law Firm, our team understands how important these matters are, which is why we are committed to assisting you. Contact us today to learn more.
