BANKRUPTCY: ONE OPTION FOR OVERWHELMING CREDIT CARD DEBT IN ILLINOIS
Countless people in Illinois currently find themselves buried under mountains of credit card debt. Getting ahead of this debt is even more difficult given that many rely on credit cards for everyday purchases since they are burdened financially given the current economic climate - not to mention the high credit card interest rates. While some people with large credit card debt in Illinois pursue relief options such as debt consolidation or negotiating with the credit card companies, many have determined their best option is to discharge the credit card debt in an Illinois bankruptcy court.
Discharging Credit Card Debt in Illinois
Following an Illinois Chapter 7 bankruptcy, a creditor generally will not be able to pursue a debtor for credit card debt - this is commonly known as "discharging" the debt during bankruptcy. However, the bankruptcy code expressly states a debtor cannot discharge debt that was obtained by "false pretenses, a false representation or actual fraud."
In order for a creditor to except credit card debt from discharge in an Illinois bankruptcy court they can prove fraud by showing either that the debtor made an intentional misrepresentation upon which the creditor justifiably relied, or, the debtor perpetrated a positive fraud against the creditor.
In addition, proving fraudulent intent with credit card debt is usually a question of whether the debtor intended to repay the debt or not, and is based on a subjective standard at the time the debt was incurred. Bankruptcy courts in Illinois have in the past utilized a test developed in the Ninth Circuit as guidance for determining fraudulent intent - commonly known as the Dougherty factors.
These 12 factors, which are neither exclusive nor dispositive, include:
- The length of time between the charges made and the filing of bankruptcy
- Whether or not an attorney has been consulted concerning the filing of bankruptcy before the charges were made
- The number of charges made
- The amount of the charges
- The financial condition of the debtor at the time the charges were made
- Whether the charges were above the credit limit of the account
- Whether the debtor made multiple charges on the same day
- Whether or not the debtor was employed
- The debtor's prospects for employment
- Financial sophistication of the debtor
- Whether there was a sudden change in the debtor's buying habits
- Whether the purchases were made for luxuries or necessities
For example, say a couple named Blake and Crystal have credit card debt in the amount of $20,000. They are unable to pay their bills so they consult with an attorney to see what their options are, where they learn that credit card debt is dischargeable. They then go out and buy many luxury items such as jewelry and clothes; amounting to an additional debt of $10,000. Under these circumstances, it is likely that the last $10,000 charged by Blake a Crystal will not be discharged by filing for bankruptcy - although the original $20,000 may still be dischargeable.
Under the vast majority of circumstances credit card debt will be able to be discharged by honest debtors. Bankruptcy is meant as a fresh start for those who find themselves unable to pay their bills - regardless of whether you have a large or small income. If you currently find yourself stressed beyond reason with insurmountable debt - credit card or otherwise - contact an experienced bankruptcy attorney in your area today to learn what option is best for you.