In the aftermath of a bankruptcy filing, people often wonder how to go about rebuilding. Your credit file is frozen, so you can’t apply for any new credit while your case is proceeding through the system. This factor leads many filers to wonder if it’s possible to keep a credit card while filing bankruptcy, in case of emergencies, and to help with the re-establishment of a responsible financial life. The answer is probably no.
Why You Can’t Keep Your Credit Card
While it may seem like a good idea to the consumer, bankruptcy laws and lenders don’t see it as a positive thing to keep a credit card after your bankruptcy filing. Here are a few of the reasons why.
- In bankruptcy, one of the goals is to treat all your creditors equally. Therefore, you can’t discharge what you owe to one credit card issuer and keep a different card. You must list all of your creditors, even if your account has a zero balance, and you cannot prioritize making payment to one over another.
- It doesn’t help you re-establish your credit after the bankruptcy. When a lender learns that you have filed bankruptcy, they will no longer lend you money, even if your account is at zero. Major lenders use services to monitor bankruptcy filings all over the country just for this purpose.
- Creditors must receive notice of the bankruptcy before the debt can be discharged.
- If you managed to keep an account somehow open and borrow money on it, you can’t file bankruptcy on that account later in most courts.
How to Re-Establish Yourself After Bankruptcy
After your bankruptcy, the filing stays on your credit file from seven to 10 years. Once everything is final, though, you can find creditors who are willing to work with you to rebuild your credit. Here are two options to explore.
- Secured credit card: This type of card requires you to put up a cash deposit equal to the credit limit. Once you show that you can and will pay on time, the lender can make the card unsecured, releasing your deposit and giving you a traditional credit card.
- Higher interest rates: You should be prepared to pay higher interest rates and live with a lower credit limit while you are emerging from bankruptcy. However, you should not be preyed upon by unethical lenders. Read everything carefully and walk away from anything with unreasonable fees.
It may feel like the end of the financial world, but you can come out of bankruptcy, having learned better ways to manage your credit. Let go of the credit cards on the front end, avoid the trouble trying to hide them can bring, and focus on rebuilding on the other side. To learn more about how to do this, contact a knowledgeable and experienced bankruptcy lawyer, like from Chorches Bankruptcy Law, for help.