Arizona Bankruptcy and Credit Card Debt
Posted on behalf of Phillips Law Group on Jul 06, 2009 in Local
Millions of people in the United States file for bankruptcy protection every year, and one of the leading reasons for the need for this type of protection is the accumulation of credit card debt. The people of the United States collectively carry almost one trillion dollars in credit card debt, and that comes to an average of more than $9,000.00 of debt per household.
As a result, credit card companies are constantly losing out on the debt theyre owed because of bankruptcy, and especially since the changes in the bankruptcy laws that occurred in 2005, these companies are becoming more aggressive in challenging the discharge of these debts on bankruptcy petitions. Below is an overview of this issue, including the nature of this debt, how its challenged in bankruptcy proceedings and what you should do if you are facing an ever-growing amount of credit card debt.
The Nature of Credit Card Debt
Credit card debt is classified in the legal realm as unsecured debt. What this means is that there is no collateral offered in exchange for the extension of credit. In contrast, an auto loan is considered secured debt, because the vehicle is collateral that can be repossessed if the borrower defaults on the financing arrangement. Although there are exceptions, credit card companies do not have the right to collect in this manner.
Although the law has recently changed to an extent, credit card companies can also change their interest rates, and they typically do when someones payment history is not positive. However, they are now required to provide notice of this interest rate change, which was not required even a few months ago.
Credit Card Debt in Bankruptcy Proceedings
When a typical bankruptcy petition is filed by the debtor, the creditors have an opportunity to challenge the imminent discharge, or removal, of certain debts. Until the law changed in 2005, credit card debt could only be challenged in Chapter 7, or liquidation proceedings and not Chapter 13 petitions, which involve a payment plan.
However, that changed in 2005, but credit card companies can still challenge the removal of this debt if they can show that the debtor committed fraud. Some actions that could show fraud include:
- Making several purchases immediately before filing for bankruptcy
- Withdrawing several cash advances immediately before filing
- Opening a new account and using it heavily immediately before filing
Basically, the standard that is generally applied for fraud is whether or not the debtor ever had any intent to repay the debt.
Arizona Bankruptcy Attorneys - How to Proceed
If you are facing mounting credit card debt and youre not sure how to handle it, you need to seek legal help. Contact the bankruptcy attorneys at Montano Arentz & Associates, PLLCas soon as possible to schedule an initial consultation so that an attorney can analyze your financial situation and help you decide what would be best for you as you work towards putting this stress behind you.