Perhaps youâ€™ve considered filing a Chapter 7 bankruptcy but youâ€™ve hesitated because you werenâ€™t quite sure what will happen.Â Can creditors come after you for repayment even after you file?Â Will all credit card debt automatically be dismissed? Those are troublesome questions, to be sure.Â A brief explanation of the Chapter 7 provisions can help put your mind at ease.
At the end of your bankruptcy case, the credit card charges that you have included under bankruptcy will be discharged. This simply means that you’ll be released from liability for certain types of debts according to the Federal Courts system. Â In the rare and unlikely event that your estate has enough money, its Trustee will pay off some of your credit card debt on a pro rata (proportional) basis, typically pennies on the dollar.
However, there are some types of credit card debt that are not dischargeable. These include credit card charges incurred based on fraud, luxury goods and cash advances. It is important to note that in this case the courts define fraud as purchasing over $600 worth of luxuries (goods other than what would be considered daily living needs or services in the 90 days just before filing for Chapter 7 bankruptcy) according to a Nolo.com article. Withdrawing large sums in cash advances prior to the filing can prevent the discharge, as well. The courts base the rule for luxury goods and cash advances upon the presumption that these were made on false pretenses.
Creditors can challenge your discharge by filing a complaint with the Bankruptcy Court within a 60-day time frame. If a creditor can prove that your charges were luxurious, then the discharge may not occur, and you may be liable for repayment. If no such claims are filed, then the courts will discharge everything.
Bankruptcy laws can provide relief for the individual who is clearly overwhelmed, but they also protect the rights of the creditor. However, creditors must provide enough evidence to prove that a debtor deliberately purchased luxury items knowing that repayment would never be made. Otherwise, the debts are discharged.
If you are in debt and are considering filing for bankruptcy, then call the law office of Jayson Lutzky. Mr. Lutzky is an attorney with over 31 years of legal experience in New York. He has represented thousands of satisfied clients over the years and offers free in-office consultations. To set up an appointment, call 718-514-6619. To learn more about Mr. Lutzky, visitÂ www.MyNewYorkCityLawyer.com.