Does Filing Chapter 13 Bankruptcy Get Rid of Credit Card Debt?
Chapter 13 bankruptcy is called a “reorganization bankruptcy” because you repay your creditors according to a repayment – over a period of three to five years.
Some creditors are paid in full under Chapter 13 bankruptcy, some creditors are paid in part, and some creditors are not repaid at all. Which creditors get repaid is determined by the “priority” the debt has under bankruptcy law.
Credit cards generally have the lowest repayment “priority” in a Chapter 13 bankruptcy repayment plan.
Credit Card Debt Priority in Chapter 13 Bankruptcy
The bankruptcy laws divide debts into different classes:
- Secured debts: car loans, mortgages, etc.
- Priority unsecured debts: taxes, child support, alimony, etc.
- General unsecured debts: credit cards, medical bills, etc.
General unsecured debts such as credit card debts are at “the bottom of the barrel” and typically in many cases Chapter 13 debtors do not have to pay their credit card debts in full.
How Much Credit Card Debt Will You Pay in Chapter 13?
When you file your Chapter 13 bankruptcy repayment plan, you list all creditors and propose how you will repay each class of debt. The repayment plan must be enough to pay all secured debts (if you want to keep the property), plus all priority unsecured debts. Finally, you must also pay whatever you can afford toward the general unsecured debts. Your credit card companies will then be entitled to receive a percentage of what they are owed,based on this leftover amount
Credit Card Debts NOT Discharged in Chapter 13
There are certain “exceptions” where Chapter 13 cannot be used to wipe out credit card debts. If you incurred credit card based on fraud or misrepresentation – or if you charged certain “luxury items or services” or took out cash advances – the creditor can object to the discharge of the debt.
Detroit Area’s Best Chapter 13 Bankruptcy Lawyers
Our bankruptcy lawyers have helped hundreds of individuals in the Detroit area, and across the greater Wayne County & Oakland County area significantly reduce – or even wipe out – credit card debt by filing Chapter 13 bankruptcy.
Call our experienced bankruptcy lawyers today for a FREE CONSULTATION to see if filing Chapter 13 is right for you!