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How to File Bankruptcy on Credit Card Debt
Understanding How to File Bankruptcy on Credit Card Debt If you’re overwhelmed by unpaid credit cards, you may be wondering
August 20, 2025
How to File Bankruptcy on Credit Card Debt
Understanding How to File Bankruptcy on Credit Card Debt
If you’re overwhelmed by unpaid credit cards, you may be wondering how to file bankruptcy on credit card debt. Bankruptcy is a legal tool that can offer a fresh financial start, but the process involves specific rules and consequences that are important to understand. Knowing what to expect can help you decide whether bankruptcy is the right solution and how to approach it with confidence.
What Types of Bankruptcy Apply to Credit Card Debt?
Filing for bankruptcy doesn’t mean the same thing for everyone. Different types of bankruptcy serve different purposes, and not all are suited to resolving unsecured debts like credit cards. Most consumers file either Chapter 7 or Chapter 13 bankruptcy, depending on their financial situation.
Chapter 7 Bankruptcy Overview
Chapter 7 is often called “liquidation bankruptcy.” It’s the most common type used for discharging credit card debt. When you file for Chapter 7:
- Most unsecured debts, including credit cards, are eliminated.
- The process usually takes three to six months.
- You may have to give up certain non-exempt assets (although most filers keep their basic property).
To qualify, you must pass a means test proving that your income is below the state’s median or that you have little disposable income after basic expenses. Once approved, your credit card accounts are frozen, and creditors must stop collection efforts.
Chapter 13 Bankruptcy Overview
Chapter 13 is known as “reorganization bankruptcy.” It’s designed for people who have enough income to repay at least some of their debts over time.
Here’s how it works:
- You propose a 3- to 5-year repayment plan to pay part of your debts.
- Credit card balances may be reduced or discharged at the end of the plan.
- You can keep your assets, even if they’re not exempt under state law.
This option is often used by people who don’t qualify for Chapter 7 or who want to avoid asset liquidation.
Which Chapter Is Right for Credit Card Relief?
Choosing between Chapter 7 and Chapter 13 depends on your income, assets, and financial goals. If your main problem is overwhelming credit card debt and you have minimal property, Chapter 7 may offer the fastest relief. If you’re behind on mortgage or car payments and need to catch up while keeping your property, Chapter 13 could be a better option.
An experienced bankruptcy attorney can help you compare both paths and determine the most strategic filing.
Are You Eligible to File Bankruptcy on Credit Card Debt?
Filing bankruptcy isn’t automatic—you must meet legal eligibility requirements. Your income, debt level, and financial history all affect whether you can file and what chapter you can choose.
Means Test Requirements for Chapter 7
To file Chapter 7, you must pass the bankruptcy means test. This test compares your household income to your state’s median income based on family size. If your income is below the median, you automatically qualify.
If it’s above, you’ll need to complete additional calculations to show that your disposable income (after necessary expenses) is too low to pay off unsecured debts like credit cards.
The means test discourages higher-income earners from discharging debts they could afford to repay, even in part.
Debt Limits and Payment Plans for Chapter 13
Chapter 13 has debt limits that may change periodically. As of recent guidelines:
- Unsecured debt (like credit cards) must be under approximately $465,000.
- Secured debt (like mortgages or car loans) must be under approximately $1.4 million.
You also need a steady income to make monthly payments under the court-approved plan. If your income fluctuates or is too low, Chapter 13 may not be viable.
Other Qualification Factors
Additional rules may affect your eligibility, including:
- Bankruptcy history: You cannot file Chapter 7 if you received a discharge in a prior Chapter 7 case within the last 8 years.
- Intentional fraud: If you ran up debt with no intention to repay (e.g., luxury purchases just before filing), the court may deny discharge for those specific debts.
- Recent credit counseling: You must complete a credit counseling course from an approved provider within 180 days before filing.
Step-by-Step Process to File Bankruptcy for Credit Card Debt
Knowing how to file bankruptcy on credit card debt involves more than just submitting paperwork. Each step is designed to ensure you’re eligible, informed, and ready for the legal and financial implications. Here’s what you can expect.
Collecting Financial Documents
Start by gathering detailed financial records, including:
- Recent credit card statements
- Pay stubs and income sources from the past six months
- Tax returns (typically two years’ worth)
- A list of all assets, including real estate, vehicles, and valuables
- Monthly living expenses like rent, utilities, food, and insurance
These documents are required to complete your bankruptcy petition and pass the means test. Accurate records help prevent mistakes that could delay or jeopardize your case.
Attending Credit Counseling
Before you can file, the law requires you to complete a credit counseling course from an agency approved by the U.S. Trustee Program. The session typically lasts 60–90 minutes and covers:
- Alternatives to bankruptcy
- Debt management advice
- Budgeting tools
Once complete, you’ll receive a certificate that must be filed with the bankruptcy court. This step proves you’ve explored your options and are making an informed decision.
Filing Forms with the Bankruptcy Court
Next, your attorney (or you, if filing pro se) will file a series of legal forms with the appropriate bankruptcy court in your district. These forms include:
- The voluntary petition for bankruptcy
- Schedules of assets and liabilities
- A detailed income and expense statement
- A list of creditors and the amounts owed
When your case is filed, a court-appointed trustee will be assigned to oversee it. At this point, an automatic stay goes into effect, which stops all collection activity—including credit card lawsuits, wage garnishments, and phone calls from collectors.
Meeting of Creditors and Discharge Timeline
Approximately 3–5 weeks after filing, you’ll attend a 341 meeting of creditors, where the trustee (and possibly creditors) may ask questions about your finances. This meeting is usually brief and non-adversarial.
After that:
- In Chapter 7, you may receive a discharge of your credit card debt in about 60–90 days, provided no objections are raised.
- In Chapter 13, the court confirms your payment plan, and credit card balances may be reduced or discharged at the end of your 3- to 5-year repayment plan.
What Happens to Your Credit and Assets After Bankruptcy?
Filing bankruptcy on credit card debt brings both short-term relief and long-term consequences. It’s important to understand what happens to your financial profile after discharge.
Impact on Your Credit Score
Your credit score will drop after filing bankruptcy. The extent of the drop depends on your starting score, but most people see a decrease of 100–200 points.
Chapter 7 bankruptcy stays on your credit report for 10 years, while Chapter 13 remains for 7 years. However, the negative impact fades over time, especially if you work to rebuild your credit with:
- Secured credit cards
- Timely bill payments
- Low credit utilization
Many filers begin to see score improvements within 12–18 months after discharge.
Can You Keep Your Car or Home?
It depends on:
- Your equity in the property
- Whether the property is exempt under your state’s laws
- If you’re current on your loan payments
In Chapter 7, if the equity in your car or home is protected by exemption laws, you may be able to keep it. If not, the trustee could sell it to repay creditors.
In Chapter 13, you can typically keep all assets as long as you stay current on payments and include any past-due amounts in your repayment plan.
Rebuilding Credit After Discharge
After you file for bankruptcy on credit card debt, the next goal is to rebuild your financial life. Here are some post-bankruptcy recovery strategies:
- Create a budget and stick to it
- Avoid high-interest debt
- Use secured credit cards responsibly
- Monitor your credit reports for errors
- Stay current on rent, utilities, and any remaining debts
With time and smart financial habits, many filers qualify for auto loans or mortgages within 2–4 years after bankruptcy.
Common Mistakes to Avoid When Filing Bankruptcy on Credit Card Debt
While bankruptcy can be a fresh start, certain missteps can lead to delays, dismissals, or even fraud allegations. Avoid these common pitfalls to protect your case.
Running Up Debt Right Before Filing
Some people believe they can max out their cards before filing, assuming those debts will be wiped out. Unfortunately, recent charges (especially for luxury items or cash advances) can be deemed non-dischargeable, especially if made within 90 days of filing.
Transferring Assets or Hiding Income
Trying to hide property, gift money to relatives, or underreport income is considered bankruptcy fraud. If caught, the court may deny your discharge, or worse, refer the case for criminal investigation. Always disclose everything truthfully and transparently.
Ignoring Legal Deadlines
Missing deadlines, failing to complete required education courses, or submitting incorrect documents can delay your case or result in dismissal. Even simple errors on forms can have serious consequences.
Working with a bankruptcy attorney helps you avoid procedural missteps and ensures your petition is complete and accurate.
When Bankruptcy Isn’t the Right Option
While bankruptcy can be a powerful solution, it’s not ideal for everyone dealing with credit card debt. You should explore other options first to determine what fits your long-term financial goals.
Consider Debt Management or Debt Settlement
If you have enough income to make monthly payments but need reduced interest rates or more structure, a debt management plan (DMP) through a nonprofit credit counselor might work. These plans combine your credit card payments into one and may help avoid bankruptcy.
Another option is debt settlement, where you negotiate with creditors to pay less than you owe. However, this comes with downsides:
- Settled debts may be taxable
- Your credit score will still take a hit
- Some creditors won’t negotiate
- Risk of debt relief scams
Bankruptcy Consequences for Co-Signers and Joint Accounts
If someone co-signed your credit card, they remain liable for the debt, even if you receive a bankruptcy discharge. In Chapter 13, the court may protect co-signers during repayment. In Chapter 7, co-signers are typically still at risk unless they file jointly.
Long-Term Financial Planning Matters
Bankruptcy gives you a clean slate—but without new habits, it can be a temporary fix. After discharge, make a plan for:
- Building an emergency fund
- Using credit sparingly and wisely
- Creating and sticking to a realistic budget
The goal is not just eliminating debt, but preventing future financial hardship.
Regain Control by Filing Bankruptcy on Credit Card Debt
If you feel trapped by mounting balances, minimum payments, and relentless interest rates, it may be time to seriously consider how to file bankruptcy on credit card debt. Bankruptcy offers protection, peace of mind, and a legal path toward a fresh start.
With the right approach—and proper legal guidance—you can get relief from credit card debt, stop collection calls, and begin rebuilding your financial future.
Find Help Filing Bankruptcy on Credit Card Debt Today
Filing bankruptcy on credit card debt involves critical steps, legal documents, and deadlines that can be overwhelming without support. From passing the means test to completing credit counseling and understanding your discharge timeline, there’s a lot to navigate.
That’s why it’s important to speak with an experienced bankruptcy attorney who can guide you through the process and help you make informed decisions.
Start with a free evaluation at BankruptcyAttorneys.net to see if Chapter 7 or Chapter 13 is right for your situation. With the right help, you can take back control and move toward a debt-free future.
Frequently Asked Questions About Credit Card Bankruptcy
1. Can credit card companies object to my bankruptcy?
Yes, especially if they suspect fraud. For example, if you took out large charges right before filing, creditors may try to challenge the discharge of those debts. Courts will review your recent spending to assess your intent.
2. Will I lose all my credit cards after filing?
In most cases, yes. All open lines of credit are typically closed upon filing, and it’s unlikely you’ll keep any accounts unless the issuer specifically allows it, rare in Chapter 7 cases.
3. How long does a bankruptcy stay on my credit report?
A Chapter 7 bankruptcy stays on your credit report for 10 years, while a Chapter 13 bankruptcy stays for 7 years. However, many people begin rebuilding their credit within 12–18 months.
4. What’s the difference between Chapter 7 and Chapter 13 for credit card debt?
Chapter 7 wipes out most unsecured debts quickly but may involve the liquidation of non-exempt assets. Chapter 13 reorganizes your debt into a payment plan, allowing you to keep property and catch up on payments.
5. Can I apply for new credit after bankruptcy?
Yes—after your discharge, you may qualify for secured credit cards or small loans to rebuild your score. Over time, with responsible use, you can qualify for larger credit lines or loans.
Key Takeaways
- Bankruptcy can help eliminate overwhelming credit card debt through Chapter 7 or Chapter 13.
- You must meet eligibility requirements, like the means test and complete credit counseling, before filing.
- Filing provides legal protection from creditors and halts collections through the automatic stay.
- Bankruptcy impacts your credit, but also provides a path to rebuild financial stability.
- Working with a qualified attorney helps avoid errors and increases your chances of a successful discharge.
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