415.963.4004by: Jeena Cho
One of the most common questions I get from clients is “can I keep a credit card through bankruptcy?” The answer is generally “no.” For many clients who has relied on credit cards to get by on a daily basis, it’s difficult to imagine life without one. It’s important to keep the end result of bankruptcy in mind - a life without debt. Imagine being able to have a savings, a retirement fund, or your set money aside for your children’s college fund. For many who has been living paycheck to paycheck, on the edge, it’s often difficult to imagine.
In general, any debt you owe must be listed on your bankruptcy petition. This means that even if you have a balance of $1 on a credit card, it must be listed. The opposite of this is also true. If there is a $0 balance, it does not need to be listed. However, I discourage you from paying off a credit card with hopes of keeping it for the following reasons.
1. It will probably be cancelled anyway. Most financial institutions get electronic notices of bankruptcy. This means that most likely, even if the card is not listed, the bank will get notice that you have filed for bankruptcy. Even if the bank does not get notice of your bankruptcy, most credit card companies will run your credit report periodically and will most likely cancel your card.
2. Preference. If you pay any one credit card over another in excess of $600 in the 90 days prior to your bankruptcy, the Trustee in your case can get the money back from the credit card as a preference. This can cause delays in your bankruptcy, hence not advised.
You can get new credit after bankruptcy. (Although, I don’t recommend it.) Clients often tell me they received offers for car loans and credit cards shortly after filing for bankruptcy. It’s important to read the fine print as oftentimes, there is a very high monthly charge, interest rate and no grace period. The reason for these new offers are simple. After bankruptcy, you cannot file for 8 years (in case of Chapter 7 bankruptcy) and 4 years (in case of Chapter 13 bankruptcy). So, the creditors view such clients as “good bets.” The clients have no debt and can’t re-file for several years.
Almost any purchase requiring a credit card will accept a debit card. You can also get secured credit cards after bankruptcy (e.g., you give the credit card $1,000 in exchange for a credit card with a $1,000 credit limit). As mentioned in the beginning, I encourage you to save money after bankruptcy and live within your means.
This example is merely meant as an informational tool. You should consult with a San Francisco bankruptcy attorney to discuss the specifics of your case.
