If you are buried under a mountain of credit card debt, you know how stressful it can be. The constant calls and letters from collectors can feel overwhelming. You might be thinking about bankruptcy as a way to get relief, but you probably have a lot of questions. One of the most common questions people ask is, “Can I keep my credit cards if I file for bankruptcy?”
This is a very important question. At Consumer Law Attorneys, we talk to people in your exact situation every day. We want to give you clear, honest answers to help you make the best choice for you and your family. The truth is, in most cases, you will be unable to keep your credit cards after you file for bankruptcy. This article will explain why that is, what happens during the bankruptcy process, and how you can rebuild your financial life afterward.
Why You Must List All Your Debts in Bankruptcy
When you decide to file for bankruptcy, the first step is to be completely honest about your financial situation. The law is very clear about this. You must list every single one of your debts. This includes all your credit cards, even if a card has a zero balance or you want to keep it. This rule is part of your duties as a debtor under the U.S. Bankruptcy Code. Specifically, federal law under 11 U.S.C. § 521 requires you to file a complete list of your creditors.
Trying to leave a credit card off your bankruptcy paperwork is not a good idea. It can lead to serious problems, including having your bankruptcy case dismissed. The purpose of bankruptcy is to give you a fresh start. To do that, the court and your creditors need a full and accurate picture of your finances. An experienced bankruptcy lawyer will help you gather all the needed information to make sure everything is done correctly.
What Happens to Credit Cards in Chapter 7 Bankruptcy?
There are two main types of bankruptcy for people: Chapter 7 and Chapter 13. Let’s talk about Chapter 7 first.
Chapter 7 bankruptcy is often called “liquidation” bankruptcy. This sounds scary, but for most people, it doesn’t mean they lose all their property. It’s designed to wipe away many types of debt in a short period, usually just a few months. Credit card debt is what is known as “unsecured debt.” This means there is no property, like a house or a car, attached to the debt.
When you file for Chapter 7, your credit card debts are almost always included. At the end of a successful case, the court issues what is called a “discharge.” A discharge is a court order that says you are no longer legally required to pay back those debts. This is the fresh start that Chapter 7 provides.
Because your debt to the credit card company is wiped away, the company will close your account. They will do this even if you have a zero balance on the card when you file. Credit card companies regularly check public records for bankruptcy filings. Once they see you have filed, they will almost certainly cancel your card to avoid future risk. So, if you file for Chapter 7, you should expect to lose all of your current credit cards.
The good news is that the discharge also stops creditors from trying to collect from you. This means the phone calls and threatening letters must stop. This protection from harassment is also supported by the Florida Consumer Collection Practices Act.
What About Chapter 13 Bankruptcy?
Chapter 13 bankruptcy works differently. Instead of wiping out debts quickly, Chapter 13 involves creating a repayment plan that lasts for three to five years. This is often a good option for people who have a steady income and want to catch up on missed payments for a house or car.
Even in a Chapter 13 case, you will not be able to keep your credit cards. Your credit card debts will be included as part of your repayment plan. You will make one monthly payment to a bankruptcy trustee, and the trustee will pay your creditors according to the plan. Because the credit card companies are included in this plan, they will close your account.
During your Chapter 13 plan, you are not allowed to take on new debt without permission from the court. This includes using credit cards. The goal of the plan is to help you get out of debt, not create more. At the end of your repayment plan, any remaining unpaid unsecured debt, like from credit cards, is typically discharged.
Rebuilding Your Financial Life After Bankruptcy
Losing your credit cards might seem like a scary step backward, but it is actually the first step forward. Bankruptcy is designed to fix a difficult financial situation and give you a clean slate. Once the case is over, you can start rebuilding your credit. It takes time and patience, but it is very possible.
Many people are surprised to learn that they will start getting offers for new credit cards soon after their bankruptcy is complete. Be careful with these offers, as they often come with very high interest rates and fees. A better approach is to be slow and steady.
Here are a few safe ways to start rebuilding your credit:
- Get a Secured Credit Card: A secured card is a great tool for rebuilding credit. You make a small cash deposit with the credit card company, and that deposit becomes your credit limit. For example, if you deposit $300, you get a credit card with a $300 limit. You use it like a regular credit card and make monthly payments. These payments are reported to the credit bureaus. By making on-time payments, you show that you can handle credit responsibly. The Federal Trade Commission (FTC) provides great information on this and other ways to rebuild your credit history.
- Become an Authorized User: You can ask a trusted family member or friend to add you as an authorized user on their credit card account. As long as they have a good payment history, their positive use of the card may show up on your credit report and could help your score.
- Check Your Credit Report: After your bankruptcy is finished, it is a good idea to get copies of your credit reports. You want to make sure that the debts that were discharged are shown as having a zero balance. The Consumer Financial Protection Bureau (CFPB) has helpful tools to help you understand and check your credit reports. If you find errors, you have the right to dispute them.
Talk to a Lawyer to Understand Your Options
Deciding to file for bankruptcy is a big decision. It affects your debts, your property, and your future. While you generally can’t keep your credit cards through the bankruptcy process, the relief you get from overwhelming debt is often worth it. It provides a chance to reset your financial situation and build a healthier future.
You do not have to figure this all out by yourself. The experienced attorneys at Consumer Law Attorneys are here to help. We are dedicated to helping people, not banks. We will sit down with you, listen to your story, and explain all your options in a way that is easy to understand. We can help you decide if bankruptcy is the right path for you and guide you through every step of the way.
Don’t let debt control your life for another day. Take the first step toward financial freedom.
Contact Consumer Law Attorneys today for a FREE CONSULTATION. An experienced attorney will review your situation and provide an honest assessment. We are here to help you get the fresh start you deserve.
