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Can I keep some of my credit cards while filing for bankruptcy?

Credit cards can make your life easier and help you purchase items you may not be able to afford right away but agree to pay off over time. After years of relying on credit cards as a security net, the idea of losing access to them can be alarming. Despite this, when credit card debt is out of control, you may want to consider filing for bankruptcy. Filing for bankruptcy can help you out of a bad situation and give you a fresh start, usually within just a few months.

One of the most common questions for people considering bankruptcy is whether they can keep some of their credit cards after bankruptcy. If you’re ready to file for bankruptcy, consider consulting with one of our South Florida bankruptcy lawyers to learn what options are available and for advice about your specific case.

What Happens to Your Credit Card When You File For Bankruptcy?

When a bankruptcy petition is filed, the Bankruptcy Code’s automatic stay protection applies and stops creditors, lenders, and debt collectors from taking any action against you, like phone calls, collection letters, or wage garnishment. Until your bankruptcy case is either dismissed or discharged, the automatic stay lasts, and any credit card debt, including unsecured debts like medical bills, is eliminated. As soon as your credit card debt is discharged, creditors are not allowed to take any collection action against you.

Can You File for Bankruptcy and Keep a Credit Card With a Balance?

The purpose of bankruptcy is to eliminate debt, and in almost all cases, a credit card included in your bankruptcy petition will be canceled. In your bankruptcy petition, you must list all creditors, debts, and active accounts, including any credit card with a zero balance. While you may be tempted to exclude a particular debt like a pet’s medical expenses, failing to disclose all information related to your financial history may be considered fraud and result in serious consequences like your bankruptcy being dismissed or denied altogether.

As soon as your debts are discharged from bankruptcy, the credit card company will cancel your financial contracts, and as a result, they may insist on closing your account. When your credit card company no longer has a contract with you, they will not be able to sue if you decide to run up charges and stop paying. In an effort to protect themselves, they will often terminate your credit card even if there was no balance when you filed for bankruptcy. After your bankruptcy is completed, you may qualify for high interest credit cards. 

Rebuilding Your Credit After Bankruptcy

Getting a new credit card after bankruptcy is often easier than many think. In fact, shortly after you receive your discharge in bankruptcy, it is not uncommon for someone to be bombarded with offers from credit card companies. However, these credit card offers often come with steep interest rates, and the purpose of these cards should never be to finance purchases long term. Instead, after bankruptcy, when you file for a credit card, you should limit the use of your new credit card to situations where other payments are never accepted.

You should use any credit card you apply for after bankruptcy to rebuild your credit. One way you can do this is by paying your credit card in full every month to make any interest rate on the card impertinent. Even if you’re unable to apply for a regular credit card, consider applying for a secured credit card. Secured credit cards require a deposit with the bank. This deposit acts as protection in case a balance is not paid. This type of card can help you re-establish credit until you are eligible to apply for an unsecured card.

How We Can Help

Bankruptcy can be a complicated process, and when you need legal help, the most important thing you can do to protect your chances of a successful bankruptcy is to count on Brian K. McMahon. To schedule a free consultation, contact us at 561-658-1789 or online.