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Credit card debt in Chapter 13

If your debt is continuing to build and you passed the point of no return, you might be considering bankruptcy. You might be wondering what will happen to your credit card debt if you file for Chapter 13 bankruptcy. A Chapter 13 filing might be ideal if you have a regular income, want to reorganize your debts and keep your assets. 

However, you should know the details before you file. Here is what you can expect to happen to your credit card debt if you file for bankruptcy under Chapter 13.

Debt priority

First, you should understand that there are different debt classifications under bankruptcy law. According to WalletHub, credit card debt is usually a general unsecured debt, meaning it is not a top priority and you might not need to pay it back in full in Chapter 13 bankruptcy.

Paying off credit card debt with disposable income

After you pay your priority debts through your Chapter 13 repayment plan, you must put your disposable income to your non-priority debts. As long as you put all of your disposable income toward these debts and your unsecured creditors receive the same amount they would have gotten under Chapter 7, the remaining credit card debt disappears. 

Your credit after bankruptcy

Your credit score will take a hit if you file for bankruptcy, but you can successfully rebuild it if you are patient. After the discharge of your credit card debt, you will likely get a lot of credit card offers with high interest rates and fees. Avoid these offers and apply for a secured card instead. Make full payments on time with a secured card, and you will see your credit start to get better. 

Now that you know what might happen to your credit card debt if you file for Chapter 13 bankruptcy, you can make an informed decision. However, remember that each situation is unique and you should consult an attorney to avoid dismissal of your case. 

 

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  • MCBA | Maricopa County Bar Association
  • State Bar of Arizona
  • ABA | American bar Association | Defending Liberty Pursuing Justice
  • Oregon State bar
  • NACBA | National Association of Consumer Bankruptcy Attorneys
  • NACA | National Association of Consumer Advocates
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