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Bankruptcy Law Blog

Thursday, November 7, 2019

The Bankruptcy Backhoe: Digging You Out Of Debt

Credit cards are a tricky tool to master. They can be a ladder that helps you finance a purchase that improves your quality of life, or a shovel that helps you dig a dangerous pit of debt. 

Sometimes all it takes is one misstep for you to fall off the ladder and into the pit. A layoff, a health issue, or car troubles could force you to take on more credit card debt than you would like. Suddenly, you are so far in debt you realize there is no way you can crawl out. 

That’s where we come in. Think of Padgett & Robertson as your bankruptcy backhoe. We can use the legal tools available in the bankruptcy code to reach into the pit and dig you out. 

A Clean Slate

Unlike many other kinds of debt, credit card debt can be fully discharged, or wiped out, in bankruptcy.

If you file for Chapter 7 bankruptcy, most of your assets will be sold off, and the proceeds will be used to pay off your debts. If you don’t have a lot of assets to sell off, that’s okay. Creditors do not expect to get paid back if a debtor files for Chapter 7 bankruptcy.

Remaining credit card debt is then forgiven. Some other debts, like tax debt, student loan debt, or past due alimony or child support, cannot be forgiven and must be paid back. 

There’s Always A Catch

If you have been struggling to pay off credit card debt, this may all sound too good to be true. Surely there must be a catch? 

There is. Some credit card debt may be classified as “nondischargeable.” Nondischargeable debt cannot be forgiven. You must ultimately pay it back.

The most common form of nondischargeable debt is unnecessary debt that was incurred in the 90 days prior to the day you filed for bankruptcy. The law presumes that in the three months leading up to your bankruptcy filing you knew you were in financial trouble. If you made a bunch of extra purchases on your credit card during that time, the court is going to assume that you did so without intending to pay your credit card company back; that you expected your debts would be forgiven when you filed for bankruptcy. 

The courts may also look through all the charges you made in the 90 days before filing and see if you took any cash advances or bought anything it would consider a luxury good. Those charges are considered fraudulent, and are nondischargeable. 

There is a fine line between everyday spending and extra spending, and between everyday items and luxury goods. Spending money on food, clothing, and gas is generally okay, but filling your cupboards to their bursting point or buying every item of clothing you intend to wear for the next several years is frowned upon.

Digging You Out Of The Pit 

If you are in a financial pit, the Padgett & Robertson team will do everything it can to help dig you out. We have the experience and the skill set needed to help get you back on your feet and moving forward. Contact us today to schedule a free initial consultation.

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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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| Phone: 251-342-0264

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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”