The average credit card debt in New York state is approximately $6,390. For some, that can be managed. But if you are experiencing financial difficulties, it may be beyond your ability to cope with, especially if you have high-interest credit cards that make paying down the principal impossible.

Credit card balances are unsecured debts, so they can be discharged in bankruptcy. When you file for Chapter 7, all unsecured debts are wiped away, meaning that you are no longer legally obligated to pay them. There is also no tax liability for them, unlike debts that are forgiven after reaching a private agreement with the lender.

Chapter 7 or Chapter 13?

Chapter 7 is a popular option for credit card debt relief because it is over with in a matter of months, there is no repayment plan and, unlike Chapter 13, there are no limits on the amount of non-exempt debt you can eliminate. (You may, however, have to surrender non-exempt assets for sale and distribution to your creditors.) To qualify for Chapter 7, your income must not exceed the median for New York state: if it does then, the courts may conclude that you have the financial resources to repay creditors in a Chapter 13 filing.

Chapter 13 does not eliminate debt, but it does stop creditor actions and allow you to pay off as much debt as possible over three to five years. Unlike Chapter 7, your property won’t be seized to repay your credit card issuers and if you also owe non-dischargeable debts, such as child support and taxes, you have more time to pay them off.

Whichever filing you choose, all credit card debt must be included in the bankruptcy petition. Some people wonder if they can keep one “for emergencies,” but if a credit card has a balance, it MUST be included. If a card has a zero balance, however, it is not considered a debt obligation and does not have to be disclosed in the filing.

Credit card fraud

If you use credit cards to purchase luxury items before filing for bankruptcy, then it creates a presumption of fraud that can jeopardize your discharge. The U.S. bankruptcy laws are designed to protect those who act in good faith, not people who try to use the system for their own personal benefit.

In summary, high-interest credit card debt forces thousands of consumers into personal bankruptcy every year. If you’ve been experiencing financial challenges that make it impossible to meet all of your obligations, then contact a New York bankruptcy attorney who will review your options and guide you toward the debt relief solution that meets your needs and provides you with a fresh start. Jayson Lutzky, P.C. is a Bronx, New York law firm handling personal bankruptcy cases involving credit card debt. Meet with Mr. Lutzky in a free in-person consultation. Call 718-514-6619 to set up a meeting or visit to learn more about Mr. Lutzky.