January 21, 2020

When are Credit Card Debts at Risk for a Bankruptcy Challenge

Nine times out of ten, when I meet with a potential bankruptcy client, that individual will have credit card debts.  In some cases, credit card debt can be startlingly large – I have seen many cases that include over $100,000 of credit card debt.

As you may suspect, the bankruptcy law provides that credit card lenders can challenge your discharge in certain circumstances.   You cannot, for example, go to an electronics superstore, buy a flat panel television and a $10,000 stereo system using your credit card, then file a bankruptcy the next week to wipe out the debt.

The Bankruptcy Code speaks to two situations in which credit card debt to a specific credit card lender can be declared non-dischargeable:

Recently incurred credit card debts

Bankruptcy Code Section  523(a)(2)(c) provides that the following debts are presumed non-dischargeable:

(I) consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and

(II) cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable

Credit Card Debts Incurred by Fraud or with No Realistic Expectation to Repay

Bankruptcy Code Section 523(a)(2)(b) allows a creditor to challenge the discharge of the following types of debts:

(A) [debts incurred by] false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;

(B) use of a statement in writing—

(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive

As you can see, very recent debts like “credit card binge” debts are automatically presumed non-dischargeable, while just slightly older debts are presumed dischargeable, but can be subject to challenge.

As you might imagine, Section 523(a)(2)(b) results in a lot more litigation.  When my clients ask for my take about this, I respond that my rule of thumb has been that if you owe more than $15,000 to any one creditor, a live person in the loss mitigation division of that lender is going to look at your account.

My colleague Cathy Moran, a California bankruptcy lawyer who also writes for the Bankruptcy Law Network, has a useful post that offers more detail about when your credit card account may be at risk for triggering a challenge.

As I explain to my clients, you want to avoid litigation, even if you think you can win.  Bankruptcy litigation can get very expensive very quickly so taking the time to identify the risk factors and discussing strategies with your lawyer to minimize that risk will serve you well.

About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.


  1. I was facing bankruptcy with over $200,000 in credit card debt from a small business venture that suffered badly in the current market crisis. I found great relief by negotiating settlements with my creditors, reducing my debt to only $30,000 in less than a year and avoiding bankruptcy. I’m currently sharing the “how I did it story” on my website and believe that your colleagues and readers will find it very helpful. Happy Holidays.

  2. Kenny, I am so glad to find you here because i would like to settle mt cc debt. I am out of job for long time living on family subsidies and same time paying the cc min. payments. Now it becomes more difficult due to duration of unemployment.
    Please share with me how to handle it from 200k to 30k.
    Thanks in advance.

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