No one ever wants to file for bankruptcy, but sometimes it is necessary. If you are in this situation, you probably have a lot of questions, such as what happens to your credit cards. Is it possible to keep your old credit cards when filing bankruptcy? If it is possible, is it a good or bad idea? After reading this simple guide, you will be better equipped to discuss your options with a Memphis, TN bankruptcy lawyer.
Keeping a Credit Card
It is possible to keep an old credit card. However, if you still owe anything on a credit card, it will be listed among your debt. By reaffirming a card, you can usually enter into a new agreement with the credit card company. If you do not owe anything on a particular card, then you can continue using it as if nothing has changed. However, the credit card company will likely increase your rates once they hear about your bankruptcy.
While it is possible to keep a credit card in bankruptcy, it is generally not recommended. This is especially true if overspending is one of the reasons that led you to bankruptcy. While keeping an old card is considered a bad idea, it can be very beneficial to get a new credit card after filing bankruptcy.
A New Credit Card
When you file bankruptcy, you will lose all your credit. Getting a new card is a great way to begin building credit once again. After filing bankruptcy, you will want a credit card for all the same reasons you would want one normally. It makes it easier to be approved for a loan, and generally helps with your financial health.
There are a few things you should know about getting a new credit card after bankruptcy:
- A chapter 13 bankruptcy will stay on your record for seven years and a chapter seven bankruptcy will remain for 10 years. This will likely affect your rates
- You should establish yourself prior to applying for a new credit card. Do not immediately jump back into a new credit card until your financial situation has settled and you have addressed some of the more important issues, such as income and mortgages.
- Make sure all your old accounts are completely closed before opening a new one. You may want to get a credit report to check if your old cards are all marked as included in the bankruptcy. This may take up to 90 days.
The most important thing is to be sure you form good spending habits to avoid falling into financial hardship once again.
Thanks to Darrell Castle & Associates, PLLC for their insight into bankruptcy law and keeping credit cards during bankruptcy.