After medical bills, credit card debt stands as a top reason individuals choose to file for Chapter 7 bankruptcy protection. Although many states have caps –New Mexico has a 50% cap on interest rates on credit card accounts – the level of these caps can leave cardholders in perilous financial condition. For those people considering the option of filing a Chapter 7 bankruptcy action, it should be noted that credit card companies will fight the debtor’s goals of eliminating – or discharging – his or her debt from particular credit card accounts.
Credit card lenders can and, in fact, do initiate adversary proceedings within the framework of the Chapter 7 bankruptcy case to challenge credit card debt generated under certain conditions. If the credit card companies successfully show an applicant for a credit card gave false information on their application or that the debtor ran up significant debt in the last few months before filing, the bankruptcy court deny the discharge of certain credit card claims.
Bankruptcy courts in Chapter 7 cases will look at these factors in assessing whether the debt on a particular credit card should be denied discharge:
- The time passed between the credit card use and the bankruptcy filing
- The number and amount of charges you made, possibly up to a year before you filed for bankruptcy
- If you ever went over your credit limit, and how often
- Your financial and employment status when you filed for bankruptcy
- Whether there was a noticeable and sudden change in your use of the credit card
- Whether you used the card to buy luxury items or to take cash advances.
Just as it can be deemed to be fraudulent to transfer certain funds within 90 days of a bankruptcy without receiving any valuable consideration in return, it can be deemed improper to load up credit cards during such a time period just to have the chance to get it removed via bankruptcy. It should be noted that even with a discharge of specific credit card debts, debtors will have to make some payments towards each such claim. Generally, though, debtors only pay a few cents on the dollar for unsecured credit card debt approved for discharge.
In Albuquerque, Giddens & Gatton Law, P.C. has bankruptcy attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases and can provide advice over which type of bankruptcy action fits one’s particular needs. The firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, P.C. at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.