“What Happens to Your Credit Cards After Bankruptcy?”

“`html

What Happens to Your Credit Cards After Bankruptcy?

Bankruptcy can discharge various consumer debts, including unpaid credit card balances. However, it often results in the cancellation of your credit card accounts, even those with no outstanding balance at the time of filing. While rare, keeping a credit card after bankruptcy depends largely on the policies of your credit card issuer.

Impact of Bankruptcy on Credit Cards

Whether you file for Chapter 7 or Chapter 13 bankruptcy, your credit card accounts will be affected similarly.

Accounts With Balances Must Be Listed as Creditors

One of the initial requirements in any bankruptcy proceeding is to provide the court with a list of all your creditors, including all credit cards, even those with no balances. All issuers of credit cards with unpaid balances will be notified of your bankruptcy filing, and most will cancel your account upon receiving such notice.

Cards With Zero Balances Will Likely Be Canceled

Even if a credit card has no balance, it may still be canceled. Bankruptcy filings are public records and appear on credit reports compiled by national credit bureaus. Credit card issuers often monitor these reports and may cancel your account upon discovering a bankruptcy filing.

Reaffirming Credit Card Debt in Bankruptcy

Federal law allows you to exempt certain debts from being discharged, a process known as reaffirming the debt. This is typically used to keep a house or car by maintaining mortgage or auto loan payments but can theoretically apply to any debt, including unpaid credit card balances. However, reaffirming credit card debt is often impractical and not advisable for several reasons:

• Issuers may still close the account even if the debt is reaffirmed.
• Credit card debt can quickly accumulate due to compound interest and low minimum payments.
• You must convince the court that you can afford to repay the reaffirmed debts and that it is in your best interest not to discharge the debt.

Authorized-User Accounts

If you are an authorized user on a credit account, you are not legally responsible for any balance on the account and do not have to include the card in the list of creditors you submit to the bankruptcy court. The account owner’s credit standing will not be affected by your bankruptcy. However, if you owe your employer reimbursements for charges made on a company card, you must list the company as a creditor, and they will be notified of your bankruptcy.

Does Filing for Bankruptcy Clear Your Credit Card Debt?

Yes, unsecured consumer debt, including unpaid credit card balances, is subject to discharge in bankruptcy.

Do I Have to List All My Credit Cards When I File Bankruptcy?

Yes, you must list all your open credit card accounts as creditors, even those with zero balances. The bankruptcy trustee needs to review activity on all accounts in the months preceding your bankruptcy filing to check for “preferential payments.”

Can You Keep Any Credit Cards After Filing for Bankruptcy?

It is legally possible to keep a credit card after bankruptcy if it has no balance at the time of your bankruptcy filing and the issuer chooses not to cancel it. However, such instances are rare.

The Bottom Line

While it’s unlikely you’ll be able to keep a credit card after bankruptcy, you will be able to get a new card eventually. A Chapter 7 bankruptcy remains on your credit report for 10 years, and a Chapter 13 for seven years, but their negative impact lessens over time. Many bankruptcy filers start receiving credit card offers within a year or two of filing. These offers typically have high interest rates and modest borrowing limits, but using them responsibly can help rebuild your credit.

You can also consider a secured credit card to jump-start your credit recovery. With a secured card, you put down a cash deposit that usually serves as your credit limit. Making purchases and maintaining timely payments on a secured credit card can benefit your credit history and improve your credit scores.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to assist you with the best mortgage solutions tailored to your needs.

“`