Bankruptcy can feel like an overwhelming and emotionally draining process. You're already dealing with financial stress, and the thought of losing all your credit cards can add to the burden. But is it possible to keep some of your credit cards even after filing for bankruptcy? This article will explore this question in detail and help you understand your options when it comes to credit cards and bankruptcy.
Can You Keep Any Credit Cards After Filing For Bankruptcy Table of Contents
Understanding Bankruptcy and Credit Cards
Understanding Bankruptcy and Credit Cards
Before diving into the specific question about keeping credit cards, it's important to understand the different types of bankruptcy and how they affect your credit accounts:
Chapter 7 Bankruptcy
- Widely known as "liquidation," Chapter 7 bankruptcy involves selling off non-exempt assets to repay creditors.
- Most unsecured debts, including credit card debts, are discharged after the bankruptcy process.
- Filing for Chapter 7 bankruptcy often leads to closure of all credit card accounts.
Chapter 13 Bankruptcy
- Also known as "reorganization," Chapter 13 bankruptcy allows you to create a repayment plan to pay off some or all of your debts over a three-to-five-year period.
- Credit card debt may be included in the repayment plan, but it is not always fully discharged.
- It may be possible to keep some credit card accounts open under a Chapter 13 bankruptcy, depending on the repayment plan.
Can You Keep Any Credit Cards After Filing for Bankruptcy?
The possibility of keeping credit cards after filing for bankruptcy depends on the type of bankruptcy, the specific credit card issuer, and your debt repayment plan. Here are some key factors to consider:
Issuer's Discretion
Ultimately, it is up to the credit card issuer whether or not to close your account once you file for bankruptcy. Credit card companies tend to close accounts when bankruptcy is filed, primarily due to the risk of potential future losses.
Reaffirmation Agreement
In some cases, you may be able to enter into a "reaffirmation agreement" with your credit card issuer during the Chapter 7 bankruptcy process. This legally binding contract acknowledges your commitment to repay the debt despite the bankruptcy and effectively "exempts" the credit card from the bankruptcy discharge.
Please note, reaffirmation agreements are not guaranteed and are often disapproved by bankruptcy courts due to the risk of continuing debt.
Chapter 13 Repayment Plan
Under a Chapter 13 bankruptcy, the debtor may have more flexibility in negotiating with creditors and establishing a repayment plan that allows them to keep certain credit card accounts.
Alternatives for Accessing Credit Post-Bankruptcy
While keeping a credit card after bankruptcy may be difficult, there are alternatives available to help reestablish and rebuild credit:
Secured Credit Card
A secured credit card requires a deposit as collateral for the credit limit. This reduces the risk for the issuer, making it easier to obtain even with a bankruptcy on your record.
Authorized User
Becoming an authorized user on a friend or family member's credit card account can help you reestablish your credit. Keep in mind, the primary account holder is ultimately responsible for any debt incurred.
Credit Builder Loans
Credit builder loans are designed to help improve your credit score. These loans are typically small and require consistent, timely payments over a set period, eventually resulting in a positive impact on your credit report.
Can You Keep Any Credit Cards After Filing For Bankruptcy Example:
Let's say you filed for Chapter 7 bankruptcy and are looking to keep one of your existing credit card accounts. Your chances are slim due to the issuer's discretion and the nature of Chapter 7 bankruptcy. However, if the issuer has a positive history with you and is willing to reconsider, you could try negotiating a reaffirmation agreement, though approval isn't guaranteed.
Alternatively, if you filed for Chapter 13 bankruptcy and have a carefully constructed repayment plan, your chances of keeping a credit card may increase. You'll need to demonstrate to the issuer and the court that you can responsibly handle the debt and maintain the account.
Bankruptcy can be a challenging period in anyone's life, but understanding your options surrounding credit cards during and after the process is crucial. Remember, rebuilding your credit is possible even after bankruptcy, so explore options like secured credit cards, authorized user accounts, or credit builder loans to get back on track. Share this article with others who may be facing similar concerns, and don't forget to check out other informative guides on Flik Eco to help you navigate personal finance and create a brighter financial future.
