Chapter 7 bankruptcy, sometimes known as “liquidation bankruptcy,” is an option for individuals, families and business owners looking for a second chance at overcoming severe amounts of debt. As the moniker implies, this type of bankruptcy entails liquidating all of your non-exempt assets as part of the process of repaying what you owe.
At the time of filing, Chapter 7 bankruptcy also places an automatic stay on your outstanding payment obligations and discharges your unsecured debts. The question might remain, though, as to what will happen to your credit card debts in particular.
Does Chapter 7 bankruptcy discharge your credit card debts?
According to the United States Courts, a discharge in bankruptcy is a release from liability for certain types of debts. Chapter 7 bankruptcy requires you to liquidate your non-exempt assets and repay all of your secured debts as well as the greatest possible amount of your unsecured debts. Most credit card debts are unsecured debts, meaning that the terms of your bankruptcy will likely discharge them at the end of your repayment period.
When does Chapter 7 bankruptcy not discharge credit card debts?
While most types of credit card debts are unsecured, there are certain types that are not dischargeable. This includes any debt taken on as a result of fraud or other false pretenses. You will also remain liable for any debts to which the creditor successfully objects the dischargement.
If you find yourself overly burdened with debt, it is likely that credit card debt accounts for some or most of that burden. Chapter 7 provides one possible avenue for relief from the debt that is weighing you down.