Legal Question in Bankruptcy in New York

Bankruptcy and Arbitration

If you have credit cards where binding arbitration is mandatory, does this stop you from being able to discharge those debts in bankruptcy?

Specifically, a clause like this:

''Severability, survival. This Arbitration Agreement shall survive: (i) termination or

changes in the Cardmember Agreement, the Account and the relationship between

you and us concerning the Account, such as the issuing of a new account number

or the transferring of the balance in the Account to another account; (ii) the

bankruptcy of any party or any similar proceeding initiated by you or on your behalf;

and (iii) payment of the debt in full by you or by a third party. If any portion of this

Arbitration Agreement is deemed invalid or unenforceable, the remaining portions

shall nevertheless remain in force.''

Does this prevent a consumer from discharging that credit card's debt in bankruptcy?


Asked on 11/17/08, 6:37 am

2 Answers from Attorneys
Stephen Starr Starr & Starr, PLLC

Re: Bankruptcy and Arbitration

In recent years some credit card companies have made arbitration mandatory for resolution of disputes involving their consumer credit card agreements. Whether or not a debt is dischargeable is determined by the provisions of the U.S. Bankruptcy Code and decisions from the U.S. Bankruptcy Court and higher courts of appeal (U.S. District Court, U.S. Court of Appeals, and U.S. Supreme Court) interpreting it. The fact that a credit card is subject to binding arbitration in and of itself should not make the debt nondischargeable. However, in certain circumstances a credit card debt can be determined to be held nondischargeable by the bankruptcy court in an adversary proceeding brought by the credit card company in the bankruptcy court.

The foregoing is intended as general information of interest to readers of this website and is not intended as legal advice for your specific situation. Facts and circumstances not disclosed in your brief posting may materially affect your rights. You should consult with an attorney.

For additional information regarding personal bankruptcy topics please free to visit the Frequently Asked Questions (FAQs) and Blog postings on our website at www.starrandstarr.com.

Best regards,

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Answered on 11/17/08, 9:35 am
Craig Robins Law Offices of Craig D. Robins (www.BankruptcyCanHelp.com)

Re: Bankruptcy and Arbitration

Your credit card debts are dischargeable. The fact there there is an arbitration clause in the credit card agreement does not reduce your rights in bankruptcy one bit.

Our office regularly helps people eliminate their debts in bankruptcy. Please call us for a free consultation. We have four convenient offices, including one in Valley Stream. Please check our web site which contains a wealth of information about bankruptcy: BankruptcyCanHelp.com.

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Answered on 11/17/08, 11:47 am


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