How Chapter 13 Bankruptcy Can Be Used To Deal With Credit Card Debts

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There are a number of different types of debts that can be managed or discharged through bankruptcy. Medical bills, overdue car payments, and late mortgage payments are just a few examples, but one other type of debt that is very common in bankruptcy proceedings is outstanding credit card debt.

Many people with credit card debt think that filing for Chapter 7 bankruptcy is the best option for them since debts can be discharged in full under Chapter 7 bankruptcy. However, Chapter 13 bankruptcy can also be used to repay your credit card debts through a repayment plan, and Chapter 13 bankruptcy can offer a variety of other benefits that some filers find appealing.

Using Chapter 13 Bankruptcy to Negotiate A Repayment Plan

Since credit cards are used to make unsecured purchases, credit card debt is considered unsecured for bankruptcy purposes, which means credit card debt is given very low priority in terms of which creditors get paid back first under a Chapter 13 repayment plan. Chapter 13 repayment plans are created in such a way that certain creditors get priority status in terms of which creditors will be paid back first.

Since most debtors have a limited amount of disposable income after paying for their essentials (such as food and shelter) each month, it is not uncommon for debtors to have so little – if any – disposable income left that unsecured debts held by creditors are paid back pennies on the dollar owed, if they are paid back under a Chapter 13 repayment plan at all.

Chapter 13 Bankruptcy and Jointly Held Credit Card Debts

When two people share a joint credit card and one of those joint credit card holders files for bankruptcy, the bankruptcy proceeding can only discharge or manage the share of the debt held by the bankruptcy filer. To say this another way, the other joint holder of the credit card is still liable for their share of the jointly held debt.

Under Chapter 13 bankruptcy proceedings, it is possible to obtain a co-debtor stay that protects the joint credit card debt holder for the duration of the bankruptcy proceeding. The purpose of the stay is to protect the other joint debt holder from collection efforts while the bankruptcy is underway. Oftentimes jointly held debts are negotiated during Chapter 13 bankruptcies, and a repayment plan is agreed upon, which further protects the other joint credit card debt holder.

Dedicated Lawyers With Experience Handling Bankruptcy Cases Like Yours

While Chapter 7 bankruptcy might be the most popular bankruptcy options when it comes to discharging credit card debt, is important to remember that Chapter 13 bankruptcy can also be used to pay off credit card debt as well. When deciding which chapter of bankruptcy is right for you, you should review the eligibility requirements, and weigh the benefits and disadvantages of each chapter type before making it is. The knowledgeable and experienced Indiana bankruptcy lawyers at Whitten & Whitten can help you decide what is best for your particular circumstances. Contact us today.