What is the Likelihood of a Dischargeability Challenge by a Credit Card Lender
By Jonathan Ginsberg, Atlanta Bankruptcy Attorney on Jan 17, 2008 in Debts Not Dischargeable
I make about $46,000 a year in gross annual income and I believe I qualify for Chapter 7 Bankruptcy, but what happens if I have $80,000 in credit card debt? Is that just erased under Chapter 7, assuming I qualify for Chapter 7? Does the bank try to get back some of that debt if a portion of that $80,000 debt was gifts given to friends?
Answer: if you qualify for Chapter 7 (meaning that your household median income falls below the median for your State or that you qualify under the means test), it is very possible that the entire $80,000 would be wiped out.
My experience has been that credit card lenders look at the following factors when deciding whether to challenge the dischargeability of a debt:
- how much debt is owed to a particular creditor? if you owe a particular credit card lender $15,000 or less, the likelihood of a challenge is reduced
- how recent was your most recent use of the lender’s credit line? if your balance was accrued over several years and there is no recent deviation from your pattern of use, then the likelihood of a challenge is reduced
- when you tapped into your credit card over the past 12 to 18 months, would a reasonable person conclude that you had a reasonable expectation of repayment? if so, the likelihood of a challenge is reduced
- were there any material misstatements or misrepresentations on your credit card application - if you were truthful about your employment, your income and your expenses, then the likelihood of a challenge is reduced
Unless your conduct was truly egregious, challenges to discharge are relatively rare. Your lawyer can analyze your personal situation and advise you if a challenge is likely.
I get this question a lot in my Atlanta bankruptcy law practice. I have also addressed the issue of creditor dischargeability actions on my Atlanta bankruptcy blog.
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