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Trying to pay down your high-rate credit card debt can feel like you’re swimming against the current but making little headway, especially if you’re only able to afford the minimum payments and the interest charges are racking up. But depending on how large your balance is, even substantial payments may barely make a dent in what you owe. So, for many Americans facing this type of financial hardship, bankruptcy often starts to look like the only solution in sight.
But while filing for bankruptcy can be a way to get rid of your debt and start over, it isn’t a simple “get out of debt free” card like many people think it is. While bankruptcy provides much-needed relief in the right situations, it also comes with significant long-term consequences for your financial future — and it won’t always clear your credit card debt, at least not in full, anyway.
As a result, understanding when bankruptcy will — and won’t — clear your credit card debt is crucial before you decide to take this path. Below, we’ll detail when exactly bankruptcy can clear your credit card debt and when you should consider your other options instead.
See what debt relief options are available to you here.
When bankruptcy will clear your credit card debt
There are two common types of bankruptcy for individuals: Chapter 7 and Chapter 13.
In most straightforward cases, Chapter 7 bankruptcy (often called “liquidation bankruptcy”) will fully eliminate your credit card debt. This is because credit cards fall under the category of “unsecured debt” — meaning there’s no collateral attached to the loan. When you file for Chapter 7, the court appoints a trustee who sells your non-exempt assets to pay creditors, after which remaining unsecured debts like credit cards are typically discharged completely.
Chapter 13 bankruptcy (known as “reorganization bankruptcy”) works differently but can still help with credit card debt. Rather than immediately discharging debts, it creates a three- to five-year repayment plan. The good news is that you’ll likely pay only a fraction of your credit card debt during this period, with the remaining balance discharged after you complete the payment plan.
Both types of bankruptcy trigger an “automatic stay” as soon as you file, which immediately stops collection calls, lawsuits, wage garnishments and other creditor actions. This alone can provide immense relief while you work through the bankruptcy process and address your debts.
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When bankruptcy won’t clear your credit card debt
Despite being a powerful tool, bankruptcy isn’t always effective against credit card debt. If you made luxury purchases or took cash advances shortly before filing (generally within 90 days), these may be considered presumptively fraudulent and won’t be discharged. In these cases, the court assumes you had no intention of repaying this money if you knew bankruptcy was imminent.
Credit card debt incurred through actual fraud or misrepresentation generally won’t be discharged either. For example, if you lied on your credit application about your income or used someone else’s identity to obtain credit, those debts will likely survive bankruptcy. Or, if your credit card spending shows a pattern that the court considers abusive — like maxing out cards with no reasonable expectation of repayment — your discharge could be denied. This is rare but happens when bankruptcy judges see evidence of bad faith.
It’s also worth noting that while bankruptcy might clear the debt, it won’t remove the negative payment history from your credit report. The bankruptcy itself will remain on your credit report for seven to 10 years, significantly impacting your financial options during that period.
What other options can get rid of your credit card debt?
These alternatives may help you better manage your credit card debt, though they won’t fully wipe the slate clean the way that Chapter 7 bankruptcy will:
- Debt forgiveness: This approach involves negotiating with your creditors to settle your debts for less than the full balance. Debt relief companies specialize in these negotiations, making them a good option to consider, but you can also attempt to settle debts on your own. However, while debt forgiveness can reduce your total owed amount, it may negatively impact your credit score and result in tax liabilities on the forgiven debt.
- Debt management: If you’re struggling with high interest rates, enrolling in a debt management plan through a credit counseling agency could help. These plans consolidate multiple credit card payments into a single monthly payment, often with reduced interest rates. Unlike bankruptcy, debt management doesn’t eliminate debt, but it can make repayment more manageable without damaging your credit as severely.
- Debt consolidation: Taking out a loan to consolidate your credit card balances into a single lower-interest payment can make repayment easier and more affordable if you qualify for a lower rate on the loan. This method works best for individuals with decent credit scores who qualify for favorable loan terms.
- Hardship programs: Don’t underestimate the power of simply calling your credit card companies. Many offer hardship programs that temporarily reduce interest rates, waive fees or modify payment terms, especially if you can demonstrate financial hardship.
The bottom line
Bankruptcy can provide crucial relief from overwhelming credit card debt, but it’s a serious financial decision with long-lasting consequences. A bankruptcy filing remains on your credit report for up to 10 years, making future borrowing more difficult and expensive. So, before filing, be sure to exhaust all other options and seek guidance from a financial expert so that you understand the implications for your specific situation. Ultimately, the best approach typically depends on your total debt amount, income stability, asset portfolio and long-term financial goals.