What Does it Mean to Have a Credit Card Company Discharge a Debt?

While the number of millenials eschewing credit cards has fallen slightly, young people aged 18 to 29 still carry, on average, $2,087 in credit card debt, according to a 2013 FICO report. For young adults facing high unemployment rates, however, paying the plastic off can seem insurmountable. Filing for a Chapter 7 or 13 bankruptcy discharges, or wipes out, most of your outstanding debt, which means your credit card company cannot collect the money you owe them.

If you find you can no longer pay your creditors, filing for bankruptcy gives you a fresh start and allows you to begin rebuilding your credit history. A Chapter 7 bankruptcy is commonly used to discharge consumer debt. Once your bankruptcy has been discharged and a final order has been issued, the bankruptcy court clerk sends a copy of the order to your creditors stating all collection actions must cease.

Bankruptcy impacts your credit score until it clears your credit report. A Chapter 7 bankruptcy stays on your credit report for up to 10 years, while a Chapter 13 bankruptcy stays on your credit report for up to seven years. How big a hit it has on your score depends on your credit history, although its impact lessens over time. Having a low credit score significantly affects your ability to borrow money, get a loan or take out a mortgage in the future.