Should You File Bankruptcy for Credit Card Debt?
Bankruptcy can completely eliminate credit card debt through Chapter 7 in six months or Chapter 13 over 3-5 years. If you earn below your state's median income and can't afford minimum payments, bankruptcy offers powerful relief that stops collections immediately.
Get Free ConsultationDrowning in credit card debt? You need real solutions.
Bankruptcy can erase your credit card debt completely. Many people explore credit counseling or debt management first. But when other methods fail, bankruptcy delivers powerful relief.
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Can Bankruptcy Erase Your Credit Card Debt?
Yes, bankruptcy can eliminate your credit card debt entirely.
Two types of bankruptcy clear credit card debt: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy erases eligible debts in six months or less. You don’t repay your unsecured debts. The process is quick and effective.
Chapter 13 bankruptcy requires a 3-5 year repayment plan. You’ll repay a portion of your debts through monthly payments. Complete the plan, and remaining credit card debt vanishes.
Both paths lead to financial freedom.
How Chapter 7 Bankruptcy Eliminates Credit Card Debt
Chapter 7 bankruptcy permanently eliminates your obligation to repay credit card debt.
The moment you file, an automatic stay protects you. Creditors must stop calling immediately. No more collection letters or lawsuits.
Chapter 7 also discharges other unsecured debts beyond credit cards.
Debts You Can Discharge in Chapter 7
- Credit card balances
- Personal loans
- Utility bills
- Past-due rent or lease payments
- Medical bills and debts
- Federal student loans (requires proving undue hardship)
Debts You Cannot Discharge in Chapter 7
- Alimony payments
- Child support obligations
- Private student loans
- Recent tax debt
- Legal judgments
Chapter 7 has an excellent success rate. Most filers receive a full discharge.
Does Chapter 7 Erase All Credit Card Debts?
Usually, yes. But rare exceptions exist.
Creditors can object to discharge in specific situations. The bankruptcy court will review these cases carefully.
Credit Card Debt From Luxury Purchases
Charged $675 or more on luxury goods within 90 days of filing? The court may deny discharge for that debt.
Luxury goods include jewelry, art, and non-essential purchases. Your trustee can sell these items to pay creditors.
Credit Card Debt for Non-Dischargeable Obligations
Used your credit card to pay child support or taxes? That debt won’t get erased.
Credit card companies can object when you transfer non-dischargeable debt onto cards.
Do You Qualify for Chapter 7 Bankruptcy?
Your income determines Chapter 7 eligibility.
Earn below your state’s median income? You likely qualify for Chapter 7. Take the means test to check your eligibility.
Make more than the median? You might still qualify.
The full means test accounts for expenses and disposable income. You may need to speak with a bankruptcy attorney for free to evaluate your situation.
Chapter 13 Bankruptcy for Credit Card Debt Relief
Don’t qualify for Chapter 7? Chapter 13 bankruptcy offers another path.
Chapter 13 creates a manageable repayment plan based on your income. You’ll typically pay a small percentage of total debt. After completing the plan, remaining credit card debt disappears.
Chapter 13 also helps you catch up on secured debts. Save your home from foreclosure or your car from repossession.
The catch? You must complete the full 3-5 year plan. Chapter 13 has a lower success rate than Chapter 7 due to plan length.
Should You File Bankruptcy for Credit Card Debt?
Answer these questions honestly:
- What’s your total credit card debt across all accounts?
- What interest rates are you paying on each card?
- What’s your current total income? Will it change soon?
- How much disposable income remains after essential expenses each month?
- What other debts do you have? (Student loans, medical bills, mortgage arrears, car loans, payday loans)
Use a credit card payoff calculator to estimate repayment time. Calculate how many years you’ll spend paying off debt.
Compare that timeline against bankruptcy’s six-month discharge period.
Other Debt Relief Options for Credit Card Debt
Bankruptcy works, but you have alternatives.
Not sure which option fits your situation? Consider speaking with a nonprofit credit counselor. Professional guidance helps you choose wisely.
Alternative Debt Relief Strategies
- Budgeting and DIY repayment using the debt snowball method if you have sufficient income
- Debt management plans that lower interest rates with credit counselor oversight
- Debt consolidation combining multiple debts into one loan with lower interest
- Debt settlement allowing partial repayment with remaining balance forgiven
Each option has specific pros and cons. Your financial situation determines the best choice.
What Happens If You Can’t Make Credit Card Payments?
Missing payments triggers immediate consequences.
You’ll face:
- Late fees added to your balance
- Interest rate increases (sometimes to 29.99%)
- Collection calls and letters from creditors
- Credit score damage from late payment reports
Continued missed payments escalate the problem.
Credit card companies eventually transfer accounts to debt collection agencies. Collectors may file a debt collection lawsuit against you.
Lose the lawsuit? Collectors can garnish your wages or levy your bank account.
Many people worry bankruptcy will destroy their credit score. Yes, bankruptcy impacts your credit initially. But you can rebuild afterward.
Here’s the truth: Missing payments also damages your credit score significantly. Collections accounts and judgments hurt even more.
Bankruptcy offers a path to recovery. Continued non-payment offers only deepening financial distress.