Does Bankruptcy Mean Cutting up Credit Cards?
September 13th, 2018 by Bunch & Brock
With the average American holding more than $6,300 in credit card debt, it’s no surprise that many American consumers go overboard when it comes to accumulating balances on their credit cards. If you have a substantial amount of credit card debt and are considering the option of filing bankruptcy, you may be wondering what will happen to your current credit cards (and your ability to open new card accounts in the future) as a result.
What to Expect From Your Current Cards
Unfortunately, when you file for bankruptcy and a repayment plan is worked out with your creditors, all of your creditors must be treated fairly and equally. From your standpoint, this means that you can’t pick and choose which debts you’d like to pay down first or which credit card accounts you’d like to keep open. In most cases, all of your current credit card accounts will be closed the moment the credit card companies discover you’re filing for bankruptcy.
It is also worth noting that if you have any open corporate credit cards in your name, these will be closed as well. Because of this, you will want to inform your employer if you are going through the process of filing for bankruptcy, so they can be aware of the fact that you will no longer be able to use your corporate card.
What About Credit Cards With Zero Balance?
Some people filing for bankruptcy make the mistaken assumption that any cards they have with a zero balance will remain open even after they file. Unfortunately, this is not usually the case. Even if you have a credit card account that has no balance and that’s in good standing, your creditor will likely close the account once news of your bankruptcy makes its way to them.
Rebuilding Your Credit After Bankruptcy
It’s important to realize that closing all credit cards after a bankruptcy is done in a matter of fairness, ensuring that all creditors to which you owe money have an opportunity to receive repayment on the same terms.
This doesn’t mean that you’ll never be able to have a credit card again. In fact, so long as you can establish and maintain responsible spending habits, opening up a credit card account after filing for bankruptcy can be a great way to begin gradually rebuilding your credit score. You may have a harder time getting approved for a traditional credit card, so opting for a secured credit card may be a better option.
If you choose to open a credit card account after going through a bankruptcy, be sure to make responsible spending habits a top priority. This means never charging more to your card than you can comfortably afford to pay off in full at the end of the billing cycle. Always remind yourself of how you got into such heavy debt in the first place, and make sure you don’t make the same mistakes again.
Get the Legal Help You Need
Navigating the world of credit cards both during and after filing for bankruptcy can be a little complicated, but having an experienced bankruptcy attorney on your side can make all the difference. If you’re looking for help with exploring bankruptcy as an option in the Lexington area, feel free to contact our team at Bunch & Brock Attorneys at Law today. Let us put our 35 years of bankruptcy experience to work for you.