Going through bankruptcy is tough, but there's the promise of starting over after the court discharges your debts. Of all your creditors, credit card companies are among the most likely to lodge objections to your debt's discharge. Whether you can overcome these objections depends on state law and the dates and amounts of specific charges.
Dischargeable Credit Card Debt
In bankruptcy proceedings, dischargeable debt refers to those debts you are no longer responsible for through the bankruptcy process. Certain credit card debt is dischargeable in bankruptcy, according to federal statutes. However, under the United States Bankruptcy Code, charges or cash advances occurring within a certain time frame before the bankruptcy protection filing are exceptions to the general discharge rule.
Under the law, credit card companies can assume that certain purchases made within 90 days of a bankruptcy filing are fraudulent. That doesn't mean you were a victim of identity theft, but that you knew you could not pay back the amount borrowed. If your credit card company objects, you must prove that your purchases made within 90 days of filing for bankruptcy were not "luxury goods" -- meaning any non-essential items. You must show receipts and prove such items were necessary. If you took out a cash advance within 70 days of your filing, it could also be considered fraudulent.
If a credit card issuer objects to dischargeability, the burden is on it to prove its claims. It must prove it has performed due diligence and investigated its claims before filing a motion in court. For example, in an Illinois case, Discover card objected to a discharge by a debtor. The court noted that Discover did not appear to review the bankruptcy petition, which would have shown a sudden income drop as the primary reason for the filing. If you can prove that your credit card issuer did not perform due diligence in claim investigation, you might overcome the objection and have the debt discharged.
The best way to overcome credit card objections in bankruptcy is by avoiding the triggers causing the card issuers to demand payment. If you're filing for bankruptcy, stop using your credit cards. If that's not possible due to your financial predicament, charge only essential items, such as food. Don't start using your charge card more often than your history indicates or make a series of small charges. The latter might signal to a creditor that you are trying to avoid suspicion.
- FindLaw: 11 U.S.C. § 523 : US Code - Section 523: Exceptions to Discharge
- Rinne Legal: What You Should Know About Objections From Credit Card Companies
- The Bankruptcy Site: Can My Credit Card Company Fight My Bankruptcy?
- American Journal of Public Health. "Medical Bankruptcy: Still Common Despite the Affordable Care Act," Page 432. Accessed Sept. 19, 2020.
- Legal Information Institute. "Protection Against Discriminatory Treatment." Accessed Sept. 19, 2020.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including Sapling, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.