Does the Chapter 7 Discharge Include Recent Credit Card Debt?

TRI Writer • June 4, 2020

If you are a Tennessee or Georgia consumer and you are considering filing for Chapter 7 bankruptcy, your most significant reason for taking action is probably overwhelming debt, such as credit card debt. Since Chapter 7 bankruptcy discharges virtually all credit card debt, many struggling consumers may be tempted to get themselves “settled” before filing. They decide to continue using their credit cards right up until they file bankruptcy – since the debt is included in the bankruptcy anyway. Right?

Tempted to Use Your Credit Cards Right Up Until You File Bankruptcy? Please Reconsider.

If you are planning to file bankruptcy and you also plan to continue using your credit cards right up until it’s time to file your bankruptcy petition , you should reconsider. Bankruptcy Code includes a presumption against the discharge of “recent” credit card debt. Any credit card debt over $675 incurred for purchasing consumer goods within 90 days of the date you file bankruptcy will not be discharged.

Is It Possible to Get Recent Consumer Debt Discharged?

While the Bankruptcy Code presumption is specific, some debtors do find themselves facing both the need to file bankruptcy and recent credit card charges. If you need to file bankruptcy and you recently used your credit cards, work with an experienced bankruptcy attorney to present information to the Court. An experienced attorney can help you show that at the time of the charge, you had no intention of filing bankruptcy and that the items purchased were not luxury items. The Court may overrule a creditor’s objection and allow debt to be discharged. While the presumption against the discharge of new debt exists in the Bankruptcy Code, it represents a rebuttable presumption. In any given bankruptcy case, the petitioner can rebut the presumption by showing evidence to the Court (receipts, documentation, etc.) to make it inapplicable to the case.

Better Safe Than Sorry – Stop Using Credit Cards When You Decide to File Bankruptcy

While the possibility exists to rebut the presumption preventing recent credit card debt from being included in the Chapter 7 discharge of debt , you should stop using all your credit cards as soon as you find yourself considering bankruptcy. Failing to set all the credit cards aside immediately is a huge risk – not just to that particular portion of the overall debt, but to the entire bankruptcy case. If the bankruptcy court decides that your behavior was intentional, or worse, fraudulent, it could lead to your bankruptcy case being dismissed or even leave you facing charges.

If you have questions about the bankruptcy process, or if you need to discuss the protections offered by bankruptcy, we can help. Find out how to get a fresh start by filing bankruptcy. Get in touch with Kenneth C. Rannick P.C., Tennessee, and Georgia bankruptcy attorney as soon as possible.

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Subchapter 5 Bankruptcy: Unlocking New Possibilities for Tennessee Residents

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Are you a Tennessee resident facing financial challenges and considering bankruptcy? If so, you may have heard about a relatively new option called Subchapter 5 bankruptcy. But what exactly is Subchapter 5 and how does it differ from traditional Chapter 11 bankruptcy? More importantly, what benefits does it offer to individuals and small businesses?  In this blog post, we will explore the world of Subchapter 5 bankruptcy and shed light on its advantages for Tennessee residents. Whether you're a struggling entrepreneur or an individual burdened by overwhelming debt, understanding the potential benefits of Subchapter 5 can help you make informed decisions about your financial future. What is Subchapter 5 Bankruptcy? Subchapter 5 is a relatively recent addition to the United States Bankruptcy Code, specifically designed to provide a streamlined and cost-effective bankruptcy process for small businesses and individuals. It was created as part of the Small Business Reorganization Act (SBRA) in 2019, with the aim of increasing accessibility to Chapter 11 bankruptcy relief. The Benefits of Subchapter 5 Bankruptcy Simplified Process: One of the key advantages of Subchapter 5 is its simplified and faster bankruptcy process. Unlike traditional Chapter 11 bankruptcy, which can be complex and costly, Subchapter 5 offers a more streamlined approach that is better suited for small businesses and individuals. Retention of Ownership: Under Subchapter 5, business owners have the opportunity to retain ownership and control of their company while developing a repayment plan. This allows for greater flexibility and the ability to restructure debts without losing ownership interests. Reduced Plan Requirements: Subchapter 5 eliminates certain stringent plan requirements that are typically associated with traditional Chapter 11 bankruptcy. This simplification of the plan process makes it more accessible to small businesses and individuals. Debt Repayment Plan: Subchapter 5 allows for the development of a debt repayment plan based on the individual's or small business's disposable income. This plan spans over three to five years, making it more manageable and achievable for debtors. Creditor-Friendly Approach: Subchapter 5 encourages creditor participation and collaboration, promoting consensual resolutions and a more amicable environment. This can lead to increased cooperation, reduced litigation costs, and ultimately, a more successful restructuring process. Subchapter 5 vs. Chapter 11 Bankruptcy: Understanding the Difference While both Subchapter 5 bankruptcy and traditional Chapter 11 bankruptcy share some similarities, there are significant differences between the two. The primary distinction lies in the complexity, cost, and requirements associated with each option. Subchapter 5 offers a more simplified and accessible bankruptcy process specifically tailored to the needs of small businesses and individuals, while Chapter 11 is better suited for larger businesses with more complex financial structures. If you're a Tennessee resident grappling with financial difficulties, Subchapter 5 bankruptcy may provide a viable solution. Its streamlined process, reduced plan requirements, and debtor-friendly approach make it an attractive option for small businesses and individuals seeking relief from overwhelming debt. Before making any decisions, it's essential to consult with a qualified bankruptcy attorney who can guide you through the process and help determine the best course of action for your specific situation. Remember, bankruptcy is not a one-size-fits-all solution, and the outcome will depend on various factors. However, understanding the potential benefits of Subchapter 5 bankruptcy can empower you to make informed decisions about your financial future. At Kenneth C. Rannick, P.C., we specialize in bankruptcy law and can provide the guidance and support you need during challenging times. Contact us today to schedule a consultation and explore your options for a fresh start. Take control of your financial future with Subchapter 5 bankruptcy. Let us help you navigate the path to a brighter tomorrow.

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