Wipe out credit card debt through bankruptcy

In most cases, you can get rid of credit card debt in Chapter 7 bankruptcy. A primary reason many people file for Chapter 7 bankruptcy is to discharge (wipe out) credit card debt. In most situations, your obligation to pay the balance will go away at the end of your case--except in instances of fraud, that is.

Attorney Tom Olsen: Paul, you're a bankruptcy attorney so tell the listeners out there what they might call you about when you about- tell us about your typical client, what people are calling you about on a day-to-day basis?

Attorney Paul Urich: Mostly it's credit card debt and the fact that they need some relief because they just can't afford to keep up with the credit cards anymore, getting a lot of mortgage fore-closures lately and occasionally I get phone calls about wages being garnished and just general debt collection question.

Attorney Tom Olsen: When people come to you and say, "I got this overwhelming credit card debt," do you ask them, do you need to know, does the court need to know how this debt was accumulated?

Attorney Paul Urich: Some of the trustees will ask what the credit card borrowings were for. Most people it's just supplementing the budget to make the budget work and then when they run out of credit they get into a crisis. Occasionally, I will get someone that just went crazy with the credit cards and ran up a bunch of money. It really depends. The credit card companies have the right to file an adversarial if they feel that the credit was taken out in an abusive fashion.

Attorney Tom Olsen: If they used a credit card to take a cruise or a credit card to buy some expensive jewelry, now they're trying to file bankruptcy they may not get away with that, is that what you're saying?

Attorney Paul Urich: Yes. It is up to the creditor. I once had a couple, it was December 23rd, the petition's really on the dining room table. The wife got the idea, we're going to go to the mall one more time. They put on $9,500 on two cards. One of the companies said nothing, the other filed an adversarial. We were able to settle out with the company but it was a little bit of a shock when I received the adversarial complaint.

Attorney Tom Olsen: If the credit card company does not dispute this credit card debt being wiped out through bankruptcy, would the trustee not dispute it on the credit card company's behalf?

Attorney Paul Urich: Pretty much the trustee's job is to just see if there are any assets or transfers that can be avoided and used to pay the creditors in a pro rather fashion.