Clients often ask “Can I keep one credit card?” We have been taught that credit cards are “good.” That it is a wise choice to have one in case of an emergency. Or, even if you don’t plan to use it for emergencies, it’s a great way to build credit. Credit cards also admittedly create comfort for us—they help us deal with the ebbs and flows of our financial life. We can take up some of those theories at a later date. In the meantime, let’s talk about credit cards after you file bankruptcy.
Most of my Charlotte bankruptcy clients want to know if they can keep an existing credit card through a bankruptcy, or if they will be able to get a credit card after filing a Chapter 7 or Chapter 13 bankruptcy. The simple answer is no. Read more to find out why.
Keeping A Credit Card During Bankruptcy
In today’s financial world, when creditors are informed that their client (that’s you) is filing a bankruptcy, they freeze the account. An exception would be a credit card company which has you sign a new agreement with them allowing the card to remain open in exchange for your agreement to NOT include it in the bankruptcy. While that may be an option, it is the exception, not the norm.
The creditors first receive notice of the bankruptcy from the bankruptcy court, a few days after your file your bankruptcy petition. Your credit report will also reflect the filing of the bankruptcy and many credit card companies keep close tabs on credit reports of their customers. We can make an attempt to keep a card in bankruptcy, but the likelihood is that the account will be terminated at the discretion of the credit card company upon filing the bankruptcy petition.
The Ability To Obtain New Credit Cards
First, you don’t absolutely need credit cards. So, even if you can’t get a credit card right after filing, you will be ok. I’m confident of this because my clients and I have discussions about how they are going to manage their finances going forward, and very rarely does this involve the use of a credit card. And this is pleasing to most clients. It’s the freedom they have been looking for.
You will probably be pleasantly surprised to find out that you will typically get credit card offers after filing bankruptcy. The rates will not be favorable, but the offers will come. Over time, the rates will get better, as your credit builds. In the alternative, you can obtain a secured credit card. A secured credit card requires a down payment by you, but then offers or extends credit up to that amount. This can actually be a great product for someone who is looking to stay in the credit game while also practicing effective management of a line of credit. Look for an upcoming post on secured credit cards to get the inside scoop on how they help you rebuild your credit.
In the meantime, email me at [email protected] or call me at 704.749.7747 to discuss your options in bankruptcy. I’m here to help.