Houston Credit Card Debt Attorney
Credit card debt is undoubtedly one of the most common reasons that many people all across the United States file bankruptcy. No matter where you live or how much you make, when your credit cards are maxed out and you have no other financial options, filing for bankruptcy can be the most effective way of dealing with the problem.
There are multiple problems with delaying the filing of a bankruptcy case for people in this scenario, as the first issue will be increased interest rates that apply less and less money to the principal that is owed. Some creditors could also file debt collection lawsuits against debtors that cause further issues.
“At The Sparrow Law Firm, we recognize that each case is uniquely different.”
Are you currently overwhelmed with credit card debt and considering possibly filing for Chapter 7 or Chapter 13 bankruptcy protection? You will want to be sure that you retain legal counsel.
The Sparrow Law Firm represents clients throughout the greater Houston area and surrounding communities in Harris County. Call 281-973-0431 or contact us online to have our firm take a closer look at your case during a free consultation.
Exceptions To Credit Card Debt Discharge
Your ability to discharge credit card debt through bankruptcy will depend on whether you can afford to pay back the debt if you have verified that you qualify for bankruptcy, whether you are sure you want to file for bankruptcy, and if a bankruptcy lawyer has given you the go-ahead. Certain kinds of credit cards may not be dischargeable. Examples include:
- Credit card debt for high-end purchases – Credit cards used to charge over $675 in expensive and nonessential items within 90 days of filing for Chapter 7 bankruptcy could lead to the court determining that your debt will not be discharged. Luxury goods and services often account for expensive items and other assets you own. “Luxury” refers to assets you do not require to support yourself or your family. Therefore, charging over $675 will often require you to wait another three months after your last luxury purchase to pursue bankruptcy.
- Debt that you accrued to pay off nondischargeable debts – If you paid off your debt for student loans, child support, owed taxes or alimony, a court would likely exempt them from the bankruptcy discharge.
- False statement on credit card applications – A false statement to deceive a creditor that was “material” to the credit card issuer’s decision to extend credit, such as a grossly inflated income, could make debt nondischargeable.
- Charging more than $725 to any single creditor for luxury goods or services within 90 days of your bankruptcy filing – This will lead to a presumption of fraudulent intent.
- Cash advance from a single creditor totaling more than $950 within 70 days of your bankruptcy filing: Another presumption of fraudulent intent.
Through bankruptcy law, a court will often assume that any costs for luxury purchases and cash advances that we were made through fraud, under false pretenses or misrepresentation. This kind of assumption means that a debtor will need to prove that they have every intention of paying off the debt when they incurred it, which is an extremely difficult burden to satisfy.
A person must get credit counseling from a government-approved organization within six months before they file for any bankruptcy relief. A state-by-state list of government-approved organizations can be found on the U.S. Trustee Program website.
Credit card companies that want to challenge a bankruptcy discharge must file complaints with the bankruptcy court where the debtor filed for bankruptcy. If creditors do not file complaints, credit card debt will be discharged even when it falls within the exceptions for luxury goods and services and cash advances.
Credit card companies can file a complaint within 60 days of the first meeting of creditors. In response, a debtor will need to file an answer within the specified deadline and dispute the creditor’s complaint. In some cases, the court will hold a hearing to decide whether the debt is dischargeable.
Chapter 7 Vs. Chapter 13 For Credit Card Debt
Many people wanting to file for bankruptcy will want to file for Chapter 7 bankruptcy because it simply allows all debts to be discharged without a debtor needing to repay anything. The problem is a person needs to achieve the income requirements in order to qualify for the Chapter 7 bankruptcy they are pursuing.
If the debtor has an average income that is less than the cutoff, they will likely qualify for bankruptcy. If a debtor’s average income is below the median income for their state, they should qualify to file a Chapter 7 case. However, income exceeding the median income level for the state will usually force a person to file for Chapter 13 instead.
If the state median income becomes higher than the average income, the debtor must pass a bankruptcy means test. Anyone who passes the test is likely going to be eligible to discharge their debt through a Chapter 7 claim.
Even if someone cannot pass the test, they still may be able to qualify for a Chapter 7 discharge. The means test has a second portion that deducts certain expenses from the applicant’s income each month.
After these expenses are removed from the income, the remaining money is known as a “debtor’s disposable income.” For anyone that does not have enough disposable income can still qualify for bankruptcy through a Chapter 7 claim.
Those who are unable to qualify for Chapter 7 bankruptcy may still be able to overcome financial hardships through applying for Chapter 13 bankruptcy. This type of bankruptcy does not eliminate your debt but instead manages your debt through a repayment plan.
These repayment plans often take between three and five years and often result in the debtor paying much less than their total debt on their credit card. Most cases only call for a debtor to pay for a small portion of their total debt.
A person pays into a three-year plan if they earn less than the median income in their state, but the plan increases to five years if they earn more than the state median income. Five years is the maximum length for any repayment plan.
When a debtor completes the Chapter 13 repayment plan, the remaining credit card debt is discharged. It is important to remember that credit card debt is largely considered unsecured debt, but there may be situations in which the credit card lender takes a security interest in the property in the credit card agreement.
The most valuable aspect of filing Chapter 7 or Chapter 13 bankruptcy will be the invocation of the automatic stay. An automatic stay immediately halts all creditor collection efforts on a debt, and the creditors can no longer call you, send you collection letters, or attempt to sue you.
In both Chapter 7 and Chapter 13 bankruptcy, a debtor can protect or “exempt” property using bankruptcy exemptions. What happens to “nonexempt” property that is not protected will depend on the bankruptcy chapter filed.
In Chapter 7 bankruptcy, the bankruptcy trustee will sell nonexempt assets and use the funds to pay back creditors. If a debtor owns a lot of property that cannot be protected with a bankruptcy exemption, filing for Chapter 7 bankruptcy may not be in their best interest.
Filing for Chapter 13 bankruptcy usually means the debtor can keep all of their property but they will have to pay their unsecured creditors an amount equal to the value of their nonexempt assets. The repayment plan will allow this amount to be repaid over a period of years.
“Don’t Be Afraid Of Bankruptcy in Texas”
– Ikaha M. Sparrow
Texas Credit Card Debt Resources
Settling Credit Card Debt | FTC Consumer Information – Visit this section of the Federal Trade Commission website to learn more about ways to deal with credit card debt when you have maxed out your credit cards. The website discusses debt settlement companies at great length, noting possible risks and also cautioning people to be aware of possible scams. Bankruptcy is listed as one possible debt resolution option.
Filing Bankruptcy for Credit Card Debt | ABI – Read this article on the American Bankruptcy Institute website to learn more about filing bankruptcy for credit card debt, using bankruptcy to stop credit card collections, and whether bankruptcy stops credit card collections and the automatic stay. You can also find information about when the credit card company alleges fraud when to stop using your credit cards, and how to get rid of credit card debt through bankruptcy. There is also information about when creditors can challenge the discharge of your credit card debt, being sued after bankruptcy, and fraudulent credit card charges in bankruptcy.
Contact A Credit Card Debt Lawyer In Houston | The Sparrow Law Firm
If you are currently struggling to pay your credit card bills and have no financial options remaining, you could benefit from filing for Chapter 7 or Chapter 13 bankruptcy protection. Make sure that you reach out to The Sparrow Law Firm as soon as possible.
Our firm can perform a complete evaluation of your current situation and help you determine the most advantageous steps forward. We will be able to completely look at your case and discuss all of your legal options when you call 281-973-0431 or contact us online to set up a free consultation.