The classic Chapter 7 bankruptcy: The debtor has a lot of credit card debt and can’t pay it. It’s so classic, in fact, that a client once told me she had recently filed Chapter 7. I said, “Are you sure it was a 7?” She replied, “Yeah, I think. Isn’t that what you do to get rid of credit card debt?”

Anyway, although credit card companies get crushed in a Chapter 7, there’s been one break: If a debtor used the credit card to pay other creditors during the 90 days preceding the bankruptcy, the other creditors had to return the money to the estate (known as a preference). But now, it appears that law might be changing. This bankruptcy blogger has the story.

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