When you file for bankruptcy, credit card debts can be included in a Chapter 13 repayment plan or can be discharged during the filing in a Chapter 7. You are not going to have to pay back the full balance owed. In a chapter 7, creditors will get some money from the sale of non-exempt assets, while in a Chapter 13 you will pay back a portion of the balance over 3-5 years. Any remaining balance due is not collectable by the creditors.
All debts you owe must be listed on your bankruptcy filing, and creditors will be informed of the bankruptcy. At this time, your credit cards are going to be cancelled. This means you cannot generally keep a card that you included in your bankruptcy filing. However, there may be certain circumstances when keeping a credit card is possible.
If you have a credit card that has a $0 balance on it, this credit card is not a debt that you owe. You generally do not need to list the credit card on your bankruptcy filing. This means that the creditor is not going to receive notice of the bankruptcy and thus will not immediately cancel your card. You can try to keep this card so you will have credit available to you.
However, the bankruptcy is noted on your credit report. The creditor can see this notation and may decide to cancel the card anyway. If this occurs, there is usually nothing that can be done about it since your credit card contract generally gives creditors the right to cancel.
Since credit card companies do not want to take the risk of lending money to someone who is bankrupt, keeping any cards is going to be very difficult or impossible even if you don’t have a balance due.
Although you cannot usually keep any of the credit cards you have, it is possible to get a secured credit card shortly after your bankruptcy filing. A secured credit card means you must put aside money or collateral that is usually equal to the credit line. Secured credit cards often charge a very high interest rate and have annual fees.
Although these features of secured credit cards make them very unattractive, you will need some type of credit in order to be able to rebuild your credit score. You should apply for a secured credit card that reports your debt activity to the credit reporting agencies. You can then charge a small amount each month and pay it in full, building up a positive payment history.
Over time, your credit score will improve and you should be able to qualify for a regular credit card again after your bankruptcy filing.
The Law Offices of Robert D. Weiss, P.C. will help debtors with all aspects of bankruptcy. Call today to schedule a consultation and learn how we can assist with your bankruptcy filing.