If you have a significant amount of credit card debt and you're having difficulty paying your bills, you may want to consider filing a Chapter 7 bankruptcy. With a Chapter 7, debtors can discharge or otherwise "wipe out" their credit card debt, with a few exceptions.

What does "discharge" mean? In a Chapter 7 case, once the case is successfully completed, the debtor's obligation to pay off the debt is eliminated. Meaning, the debtor no longer has any legal obligation to pay off the debt and the creditor cannot pursue payment.

'No-Asset' Bankruptcy Cases

The majority of Chapter 7 bankruptcies are "no-asset" cases. In a no-asset case, the debtor does not have any property that can be liquidated to pay off the creditors. If a debtor has a no-asset case, as most of them do, they do not have to give up or lose any of their personal property to pay off creditors.

Credit card debt is an unsecured obligation, and thus a nonpriority claim. Due to the unsecured nature of credit card debt, it is rare for credit card companies to receive payment in a Chapter 7 case.

Generally, credit card debt can be wiped out in a Chapter 7 bankruptcy, except where a debtor intentionally took cash advances or maxed out their credit cards with the intention of filing for bankruptcy. This is called bankruptcy fraud.

If the bankruptcy trustee discovers that a credit card debt was incurred due to fraud or false pretenses, then that credit card debt will not be dischargeable.

Bankruptcy fraud occurs when a debtor takes out over $925 in cash advances within 70 days of filing bankruptcy, or when they use a credit card to purchase over $650 in luxury goods or services within 90 days of filing bankruptcy. For example, food or gasoline wouldn't count as luxury goods, but a day at the spa would.

If you need further information about credit card debt and Chapter 7 bankruptcy, contact a bankruptcy attorney for advice.