Credit card debt can be incredibly stressful for people experiencing financial difficulties. High interest rates and late fees, along with increasingly high minimum payments, may make final payment of the debt seem impossible. The bankruptcy system may allow the discharge of some or all of a person’s credit card debt. It prevents discharge, however, of debt(s) incurred fraudulently or in bad faith, such as if a person charges a large amount to a credit card shortly before a planned bankruptcy filing.
Unsecured vs. Secured Debt
Most credit card debt is unsecured, meaning that the creditor does not have the right to repossess property, known as collateral, if the debtor defaults. In the case of a credit card issued by a retail store, the store may have the legal right to repossess whatever items the debtor purchased, although it is not always financially feasible to do so. Secured debt, such as a mortgage or car loan, generally receives higher priority for repayment from the bankruptcy estate than unsecured debt.
Bankruptcy Schedule F
Certain unsecured debts, such as child support or tax debt, are treated as “priority claims,” while the rest are “nonpriority claims.” A debtor filing for personal bankruptcy under Chapter 7 or Chapter 13 must complete Schedule F, which identifies creditors who have “unsecured nonpriority claims.” Most forms of credit card debt go on this schedule. Continue reading