What happens if you file bankruptcy on credit cards?

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Filing for bankruptcy is a serious decision that can have significant consequences on your financial life. If you find yourself overwhelmed with credit card debt, filing for bankruptcy may be an option to consider. In this article, we will explore what happens if you file bankruptcy on credit cards and how it can affect your financial situation.

Types of Bankruptcy

Before diving into the specifics, it’s important to understand the two main types of bankruptcy that individuals typically file: Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy: Also known as liquidation bankruptcy, Chapter 7 involves the sale of non-exempt assets to repay creditors. This type of bankruptcy typically lasts around three to six months, and at the end of the process, most unsecured debts, including credit card debt, are discharged.

Chapter 13 Bankruptcy: Chapter 13 bankruptcy, on the other hand, involves creating a repayment plan to pay off your debts over a period of three to five years. Under this plan, you may be required to repay a portion of your credit card debt based on your income and expenses.

Immediate Effects of Filing Bankruptcy on Credit Cards

Once you file for bankruptcy, an automatic stay goes into effect, which means that creditors must stop all collection efforts, including those related to credit card debt. This includes phone calls, letters, lawsuits, and wage garnishments. The automatic stay provides immediate relief and allows you to focus on the bankruptcy process.

Discharge of Credit Card Debt

In a Chapter 7 bankruptcy, most credit card debt is discharged, meaning you are no longer legally obligated to repay it. However, there are exceptions, such as debts incurred through fraud or luxury purchases made shortly before filing for bankruptcy. It’s important to consult with a bankruptcy attorney to understand which debts may not be discharged in your specific case.

In a Chapter 13 bankruptcy, you will be required to repay a portion of your credit card debt through the court-approved repayment plan. The amount you need to repay will depend on various factors, including your income, expenses, and the value of your non-exempt assets.

Impact on Credit Score

Filing for bankruptcy will have a significant impact on your credit score. It will likely cause a substantial drop, as bankruptcy is considered a negative event by creditors and credit reporting agencies. A bankruptcy filing can remain on your credit report for up to ten years, making it difficult to obtain new credit or loans in the future.

However, it’s worth noting that if you were already struggling with significant debt and late payments, your credit score may have already been negatively affected. In some cases, filing for bankruptcy can provide a fresh start and an opportunity to rebuild your credit over time.

Rebuilding Credit After Bankruptcy

While bankruptcy can have a long-lasting impact on your credit score, it is not the end of your financial journey. There are steps you can take to start rebuilding your credit after bankruptcy. These include:

1. Creating a budget: Develop a realistic budget to manage your expenses and ensure you can make timely payments on any remaining debts.

2. Secured credit cards: Consider obtaining a secured credit card, which requires a cash deposit as collateral. Using a secured credit card responsibly and making timely payments can help rebuild your credit over time.

3. Timely payments: Pay all your bills on time, including any remaining debts, to demonstrate responsible financial behavior.

4. Monitor your credit: Regularly check your credit reports for errors and discrepancies. You are entitled to a free copy of your credit report from each of the three major credit bureaus once a year.


Filing for bankruptcy on credit cards can provide relief from overwhelming debt, but it comes with consequences. While credit card debt can be discharged in a Chapter 7 bankruptcy, it may require repayment in a Chapter 13 bankruptcy. Bankruptcy can have a significant impact on your credit score, but with responsible financial behavior and time, you can begin to rebuild your credit.


– Investopedia: www.investopedia.com/bankruptcy-101-what-is-bankruptcy-4772009
– Nolo: www.nolo.com/legal-encyclopedia/bankruptcy
– Experian: www.experian.com/blogs/ask-experian/what-happens-to-credit-card-debt-when-you-file-bankruptcy/