One of the hardest things about filing for bankruptcy is that you automatically lose the right to hold any active lines of credit including credit cards. This is because credit cards can prove an invaluable backup in times of emergencies. What may surprise you is that there may be the occasional exception where a person can still have a credit card, subject to very stringent terms and conditions.
Bankruptcy Credit Cards
These exceptions only apply to people filing for Chapter 7 bankruptcy where the card issuer will allow you the use of their card subject to certain conditions: -
- You agree to repay them some or all of the debt you owe them despite the bankruptcy filing return for a limited line of credit
- The card company will usually require you to sign an affirmation agreement with is a contract between you and the creditor to that effect
- You accept that the interest rate on the card will be higher than their standard rate to reflect the increased risk they are taking on by allowing you to keep a card
In every other case, all credit cards must be surrendered when a bankruptcy is filed, even if you never use them or you pay them off in full each month. Trying to hold onto a card because it has a zero balance may seen to be illegal as you cannot be seen to be showing any preferential treatment to a particular creditor over another. Sorting out the repayments is the job of the bankruptcy trustee.
Best Practices When Filing For Bankruptcy
Even if you don’t meet the criteria for filling Chapter 7 bankruptcy or you have failed to get approval from your card issuer to keep your credit cards it is still best practice to surrender all your cards until your bankruptcy filing is cleared. Only then can you begin the long haul to rebuild your credit worthiness.
It may take years before you are able to obtain preferential rates for credit cards but you can lessen the time taken by always paying off the full balance on any you may get every month.