Many bankruptcy clients who come to see me are always wondering whether they can keep one or several credit cards and not put them into their bankruptcy. Many clients tell me that they want a credit card they can use for emergencies and backup. They also tell me that they are up to date with payments and they even recently just paid one off and it has no balance. Unfortunately, these reasons may seem as they are justifiable to be able to keep a credit card after filing bankruptcy but you are still not allowed. In general, you may not keep a credit card because when you file your petition you are legally required to list all of your debts and assets. Thus, intentionally leaving one out would be against the law. This action can be considered illegal since in effect your preferencing one creditor (your credit card issuer) over other creditors. In bankruptcy, you are not allowed to decide which creditors you want to pay and which you don’t want to pay.
Credit Cards Will Be Cancelled When Filing Bankruptcy
Moreover, your credit cards will be canceled regardless when your bankruptcy petition is filed. Many clients are unaware that credit card companies usually do their own routine monthly checks on their cardholders to see who has filed bankruptcy. The credit card companies close card holders for filling any kind of bankruptcy; in most cases, the credit cards of bankruptcy filers will be closed as soon as they that the cardholder files.
There are some exceptions where terms and conditions will be applied to enable the bankruptcy filers to continue holding their credit cards. Some credit card companies will allow you to keep your credit card but with a smaller credit limit, and in return you need to repay them for some of your debts. In fact, some companies will automatically send you or your attorney a proposed reaffirmation agreement, a contract between you and your creditor that you will pay all or a portion of the money owed, despite the bankruptcy filing, in exchange for a minimal amount of new credit. However, attorneys are extremely against clients doing this as it defeats the purpose of starting fresh. Reaffirmation agreements are not to be taken lightly. Once you sign the reaffirmation agreement you will be liable for the debt again. Thus, if for any reason you become late on a payment you will be held responsible for the debt and in order to get the debt discharged you will have to wait another eight years to file another chapter 7.
Report All Your Credit Cards On Your Bankruptcy Petition
Most attorneys will tell you that the best thing is to report all your credit cards and give them up. Credit card companies will begin sending you new credit card offers in the mail immediately after filing. In time, you can gradually increase your credit score and get higher credit card limits again. Paying your monthly credit balance in full and on schedule it will help you to rebuild your credit.