Can I File Bankruptcy for Only Certain Credit Cards?

When you are facing financial difficulties, it can be tempting to try and make a tailor-made solution by picking and choosing which creditors to file bankruptcy against. Unfortunately, this is not an option for most debtors. Here's why and how the process works in both Canada and the United States.

Can You Pick and Choose Creditors to File Bankruptcy Against?

Yes, you can potentially file against only some of your creditors if you are in Canada, but not in the way you might think. If you are considering filing against your credit cards only, you might be disappointed to learn that this is generally not possible. The bankruptcy process in Canada is governed by the Bankruptcy and Insolvency Act, and one of its key principles is that all unsecured creditors must be treated equally.

Understanding the Canadian Bankruptcy Process

Unsecured debts, such as credit cards, payday loans, bank overdrafts, taxes owed to the government, loans from friends, and family, among others, are subject to this principle. These types of debts are not secured by an asset like a mortgage or a car loan. Secured debts, which are debts backed by collateral, such as your home or car, are outside of the bankruptcy process. If you want to maintain ownership of your home or car, you need to pay these debts in the normal course.

Debts That Would be Subject to Bankruptcy

When it comes to filing for bankruptcy, you cannot cherry-pick which unsecured debts you want to include. All unsecured creditors in Canada must be treated equally. For example, if you file bankruptcy, you cannot keep your credit card debts and pay off everything else, including maintaining your home or car. The bankruptcy process applies to all unsecured debts.

Bankruptcy in the United States

In the U.S., the situation is slightly different but still complex. When you file for bankruptcy, you are required to list all debts, assets, income, and expenses. The U.S. Trustee and the court will review your petition to determine if you qualify for bankruptcy relief, and if so, whether under Chapter 7 (liquidation) or Chapter 13 (wage earner plan).

How Does the U.S. Bankruptcy Process Work?

Under Chapter 7, the court may use all of your assets to pay off all of your creditors. However, there are several ways to protect some of your assets:

Exemptions: Federal law offers some exemptions, and state laws may offer additional exemptions, depending on the state in which you reside. Assets Not Worth the Troubles: The Trustee may not find it worth their time to seize and sell certain assets if they have significant damage or are already secured. Reaffirmation Agreements: You can keep secured assets, such as your home or car, by reaffirming debts as long as you continue to make loan payments.

Consulting with a Local Bankruptcy Attorney

Bankruptcy can be a complex process, and navigating it without professional help is often challenging, even for simple cases. If you are contemplating bankruptcy, it is highly recommended to consult with a local lawyer who has experience with bankruptcy. They can help you understand how bankruptcy may affect your specific assets and debts.

Even with the help of a bankruptcy expert, there are no guarantees, as the outcome can vary based on many factors. It is essential to have a clear understanding of the process and the potential outcomes before making a decision.

However, the main takeaway is that picking and choosing which creditors to file against is not a feasible option in either Canada or the U.S. This is why it is crucial to consider all your options and seek professional advice before making any final decisions regarding bankruptcy.