In most cases, you can keep a credit card in a Chapter 7 bankruptcy. The bankruptcy court has no legal authority to force you to get rid of your cards. However, just because you can does not mean you necessarily should. If credit cards encourage you to overspend, it’s wise to avoid them altogether if you can. If you must keep one because of work or travel requirements, use it carefully and only when necessary.
Credit Card Debt Reaffirmation in Bankruptcy
Any balance you owe on credit cards when you file bankruptcy goes on the list of your debts. The court notifies the creditors on this list that you have filed for bankruptcy. While some credit card companies will cancel your card when they receive the notification, some will let you keep your card if you reaffirm the debt and enter a new contract to repay it. Take note, however, that if you do that, the debt won’t be discharged. You may want to consider other options unless you need that card for a specific reason, or you have a card with a very low balance. Your creditors get to decide what your options are, but most will let you reaffirm simply because they get nothing if the debt is discharged.
Options Other Than Reaffirmation
Here are two possibilities that you may want to consider other than reaffirming credit card debt in bankruptcy.
- Credit cards with no balance: If your credit card has a zero balance when you file for bankruptcy, you don’t have to include it in your list of debts, and you don’t have to notify the company. The bankruptcy court will not notify the card issuer either, but the company may still learn of the bankruptcy and raise your rates. Bankruptcy filings are public record and will show up on your credit report.
- Getting a new card after bankruptcy: You may choose to discharge the debt in the bankruptcy and get a new one afterward. A secured credit card may be a good option, or you may enlist a cosigner for a regular card. If you make the payments as scheduled for at least six months, you should be eligible for a traditional card.
- Avoiding credit cards: Bankruptcy forces you to re-evaluate your financial life. While you’re doing that, look for ways to live without credit cards. They are a primary contributor to bankruptcy filings and make it easy to spend too much and go back into debt.
If you’re facing bankruptcy, talk to an attorney about your options and all of the advantages and disadvantages. Since the rules and proceedings do vary somewhat by location, contact a credit card defense lawyer who is knowledgeable of how things work in your area.