Bankruptcy - the word can send shivers down anyone's spine when it comes to personal finances. For many people, it's a last resort - a desperate attempt to start over fresh and wipe away mountains of debt. But what about your beloved credit cards, can you still keep one? And what does the process involve? Fret not, as Flik Eco is here to break down the complex world of post-bankruptcy credit cards, and answer that burning question: Can you keep any credit cards after filing for bankruptcy?
Can You Keep Any Credit Cards After Filing For Bankruptcy Table of Contents
Understanding Bankruptcy and Credit Cards
Bankruptcy is a legal process meant to provide relief to an individual or organization drowning in debt. It is generally seen as the last resort, where other solutions like debt consolidation, debt settlement, and credit counseling have not been successful.
When it comes to credit cards, filing for bankruptcy almost always, brings an end to their usage. Let's understand why.
Your Credit Cards' Fate During Bankruptcy
There are two common types of personal bankruptcy: Chapter 7 and Chapter 13.
- Chapter 7 Bankruptcy: In Chapter 7, most of your unsecured debts, including credit card debts, are discharged, meaning they are wiped clean. Your non-exempt assets, if any, may be sold to pay off your creditors. It is highly unlikely that you will be able to keep any of your credit cards after filing for Chapter 7 bankruptcy.
- Chapter 13 Bankruptcy: Chapter 13 is more of a debt reorganization plan where you agree to pay off your debts over a 3-5 year period. Your credit cards are usually cancelled at the beginning of the process, but there's a possibility that you may be able to keep a credit card under certain circumstances (more on that below).
Can You Keep a Credit Card After Bankruptcy?
The straightforward answer is: It's highly unlikely, but there's a chance. Typically, during the bankruptcy process (either Chapter 7 or Chapter 13), you will be required to list all your debts, and your credit cards will usually be cancelled by the card issuer. However, there are a few instances when you might be able to keep a credit card:
- No Balance Credit Card: If you have a credit card with a zero balance, you may be able to keep it, but this depends on the rules in your jurisdiction and the discretion of your card issuer.
- Reaffirmation Agreement: In some cases, you can keep a credit card after filing for bankruptcy by signing a reaffirmation agreement with the lender. By signing this, you agree to continue paying the balance on the card, despite your bankruptcy protection. However, this typically may only apply if your credit card debt isn’t directly connected to the bankruptcy filing.
Can You Keep Any Credit Cards After Filing For Bankruptcy? Example:
Samantha has found herself in a tough financial spot and decides to file for Chapter 13 bankruptcy. She has $30,000 in credit card debt spread across three cards. When she begins the bankruptcy process, all of her credit cards are cancelled. However, Samantha has a fourth credit card that she doesn't owe any money on. Her bankruptcy attorney advises her that she may be able to keep the zero-balance card, providing some emergency financial cushion.
During her Chapter 13 repayment plan, Samantha also applies for a secured credit card to help rebuild her credit. The secured card has a low credit limit, but it allows her to demonstrate responsible credit usage over time, allowing her to gradually improve her credit score.
Filing for bankruptcy is never an easy decision, and weighing the pros and cons of keeping credit cards after the process can be unnerving. Remember, seeking help from a financial advisor or bankruptcy attorney is crucial to understanding your options and making informed decisions about your finances.
As you embark on your financial journey after bankruptcy, Flik Eco is here to keep you informed and support you along the way. Don't forget to share this article with anyone who may find it helpful and explore other guides on Flik Eco that can help you with your personal finance journey towards a more robust financial future!
