The trick to discharging credit card debt

by Cathy Moran, Esq.

November 20, 2008

The discharge of credit card debt, usually the single biggest component of a debtor’s unsecured debt, is dependent on the transactions on the card being free of fraud. The Bankruptcy Code excepts from discharge debts incurred by fraud, false representations or false pretenses.

Not one of my clients sees their credit card useage as fraudulent. In fact, they tend to see available credit on a card as an asset, just like money in the bank, theirs to use as they will. But it’s not. It’s the cap on the amount the card issuer has agreed to lend, assuming your intention to pay it back.

Section 523(a)(2) of the Code gives creditors who contend their debt was incurred by fraud a 60 day period following the first meeting of creditors to file a law suit in the bankruptcy case challenging the discharge of the debt, or a portion of the debt.

It isn’t enough just to claim fraud; the creditor must be prepared to prove its claim that dishonesty was involved in the transactions in question. The sticky point is that law suits are expensive and the credit card issuer is much deeper in the pocket than the newly bankrupt card holder.

Next time: how card issuers look for fraudulent card use.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.

Last modified: November 28, 2012