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Keeping Credit Cards After Filing for Bankruptcy

Posted on October 22nd, 2019 by Oddo & Babat, P.C.

Filing for bankruptcy can be a difficult but sometimes necessary decision. As consumer debt continues to rise at an ever-increasing rate, businesses and families are finding it harder to make ends meet. While bankruptcy has its disadvantages, it allows you to start over with a clean slate and, in most cases, keep important assets like your home and vehicles.

You might wonder whether you can keep some of your credit cards during and after this process. Credit cards are one of the major sources of high interest debt in the U.S. and when you file for bankruptcy, you cannot apply for new credit during the bankruptcy process and will likely have some issues obtaining new cards after.

Meeting of Creditors

At your 341 hearing, there are some courts that will ask you to turn in your credit cards, and some that will not. It is not within their authority to force you to do this. If you list your cards in your filing, the court will send a notification to all the creditors and notify them of your bankruptcy. Most credit card companies will take this opportunity to cancel your line of credit.

Reaffirming a Balance

Some companies might be willing to work with you to avoid a loss on their end. They will have you sign a new contract and you will continue to be responsible for your old balance, essentially eliminating the benefits of the bankruptcy. Since this type of debt often has a high interest rate and the purpose of the bankruptcy is to eliminate as much debt as possible, it is often not recommended to do this. There are other ways to rebuild your credit after your proceedings are completed.

Accounts with Zero Balance

You might think that a card with a zero balance isn’t relevant and doesn’t need to be listed since it is not technically an outstanding debt. While it is ultimately up to you to list all of your credit cards when you file, one card could slip through the cracks. Keep in mind that even if that company is not directly notified of your bankruptcy, your files are in the public record and credit card companies often keep track of card holders using database scanners and will likely cancel your card at some point.

Filing for bankruptcy can be a complicated process, especially if you are concerned about losing major assets such as your home or vehicles. Speak with an experienced bankruptcy lawyer, like a bankruptcy lawyer in Memphis, TN, to ensure your case is handled fairly and that you come out of this in the most beneficial way possible.

Thanks to Darrell Castle and Associates, PLLC for their insight into what happens to credit cards after filing for bankruptcy. 

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