If you’re thinking about filing for Chapter 7 bankruptcy, then you may be wondering if you can still keep a credit card.
This concern is understandable. Credit cards appear to be essential if you want to rent a hotel room, a car and enjoy other benefits that are more difficult to acquire with cash or a prepaid card, and you don’t want to keep relying on friends to help you out in this area.
While debtors are typically discouraged from keeping a credit card when they file for Chapter 7, it is technically possible to do so. Below is an overview of ways that you can retain access to credit for emergencies.
Reaffirming the debt
Any credit cards that carry a balance are included in your listed debts. If you reaffirm one of them and enter into a new agreement with them, then some credit card companies will allow you to keep your card because they don’t want to incur any losses due to discharged debt.
The credit card has no balance
Credit cards with a zero balance don’t have to be listed among your debts, so the creditor does not have to be notified of your bankruptcy. If it does find out somehow, then it may increase the interest rates or even cancel the card, so be prepared for that possibility.
You have a corporate credit card
If your employer issued you a credit card to pay for business or travel expenses, then you can likely keep using it if you’re an authorized user. This is because the company is responsible for paying all charges and the account isn’t in your name.
Even if you can’t keep an existing credit card, most Chapter 7 bankruptcies are over within three to six months. When you receive your discharge, you might be able to obtain a new credit card sooner than you think. Odd as it sounds, some lenders will regard you as a good risk because:
- All of your earlier unsecured debt was wiped out by your discharge, so you have more discretionary income to pay off a new credit card.
- The lender knows that you have to wait eight years before you file for Chapter 7 again, so they have the ability to take collection action against you if necessary.
- Most discharged debtors tend to be more cautious when using new credit, as they don’t want to end up in the same situation again.
If you are thinking about filing for Chapter 7, then a New York bankruptcy attorney will give you honest advice on whether or not keeping a credit card is possible or advisable. The goal is to give you a fresh start, and for some people, that means wiping the slate clean and starting over with no unsecured debt at all. Contact Jayson Lutzky’s office at 718-329-9500 if you are considering filing bankruptcy. Mr. Lutzky can help you determine if a Chapter 7 bankruptcy is right for your particular situation. Visit www.MyNewYorkCityLawyer.com/Bankruptcy to learn more.