Eliminating Credit Card Debt When Filing for Bankruptcy in New Jersey

New Jersey families continue to suffer through the greatest economic downturn since the Great Depression. Many unemployed workers still cannot find work and their debt only "snow-balls" - often to the point where it is impossible to get out from underneath it. For many of these struggling families, the only option they can turn to for assistance during these dire times is bankruptcy.

Often individuals consider bankruptcy as a response to mounting credit card debt. Generally, credit card debt is one of the largest unsecured debts held by most people filing for bankruptcy - which isn't surprising, given that it has been estimated that Americans as a whole carry around $800 billion in credit card debt. For these debtors, bankruptcy is often the only hope for relief from being hounded and harassed by creditors on an almost daily basis.

Dischargeability of Credit Card Debt

Generally unsecured credit card debt is dischargeable - or stated otherwise, creditors are enjoined from attempting to collect on the debt following the bankruptcy. However, the U.S. Bankruptcy Code does delineate when this type of debt is not dischargeable, and thus the debtor is still liable for the debt. Specifically, credit card debt is non-dischargeable when the credit card debt is incurred by fraud.

In the context of credit card debt, fraud can manifest itself in a variety of circumstances. A couple of the more notable instances of fraud that can render credit card debt non-dischargeable include:

  • Lying on your credit card application
  • Fraudulent use of the card

Fraudulent Use of Credit Cards

If you lied on your application when originally obtaining a credit card, it is possible that the court will not discharge the debt during bankruptcy. For example, if you falsely represented your income, assets or job in an attempt to appear more qualified for credit. However, this is not a very common route that credit card companies take.

A more common route for creditors to take when attempting to render credit card debt non-dischargeable is to show fraudulent use of the card. The Bankruptcy Code does enumerate certain situations in which fraudulent use is presumed.

For example, if a debtor charges more than $600 on a card for luxury goods - goods or services not reasonably necessary for support of the debtor - within 90 days of filing for bankruptcy, the court may deem the debt non-dischargeable. The situation is the same if a debtor gets cash advances of more than $875 on their credit card within 70 days of filing for bankruptcy.

However, not all indicators of fraud are statutorily defined. A bankruptcy court may still find evidence of fraud, and subsequently render the debt non-dischargeable, when other indicators are present. Some of the factors courts make look to include, but are not limited to:

  • the amount of time between the credit card charges and the filing of the bankruptcy
  • whether or not an attorney was consulted regarding filing for bankruptcy before the charges were made
  • the number of charges made
  • the amount of the charges
  • the financial well-being of the debtor when the charges were made
  • whether the charges were above the credit limit
  • whether several charges were made on the same day
  • whether or not the debtor made any payments on the card after large charges
  • whether or not the debtor had a job
  • if unemployed, whether the debtor had job prospects
  • whether there was a sudden change in the debtor's buying habits
  • whether the charges/purchases were necessities

Contact an Attorney

If you believe bankruptcy is the answer for you, it may be best to simply avoid using your credit card, if at all possible, in order to evade any allegations of fraudulent use.

Every situation is different, and in some instances bankruptcy may not even be the best option. For example, a qualified attorney can also help a debtor negotiate with credit card companies in an effort to consolidate balances, reduce high interest rates, eliminate late fees or even settle debts for a smaller percentage of what is owed.

If you find yourself facing insurmountable credit card debt, contact an experienced New Jersey bankruptcy attorney to be advised of what is the best way for you to manage or eliminate credit card debt.