Many people considering Chapter 7 bankruptcy in Tulsa want to know whether they can keep one or two credit cards after filing. This is understandable. A credit card can feel necessary for emergencies, travel, online purchases, rental cars, hotel reservations, or rebuilding credit after bankruptcy. However, keeping credit cards through a Chapter 7 case is usually more difficult than people expect. In most cases, credit card accounts should be listed in the bankruptcy paperwork, and most credit card companies will close the account after learning about the bankruptcy. Even if the account has a zero balance, the issuer may still close it as a business decision.
You Must List Your Creditors
A Chapter 7 debtor must provide full and accurate financial information. This includes listing debts, creditors, assets, income, expenses, and other financial information. If you owe money on a credit card, that creditor should be listed in the bankruptcy case.
You should not omit a credit card from your bankruptcy paperwork simply because you want to keep it. Failing to disclose a debt can create problems, delay the case, or affect the discharge of that debt. Bankruptcy works best when the petition is accurate and complete.
Can I Keep a Credit Card With a Zero Balance?
A credit card with a zero balance is different from one with a debt owed. If there is no balance, there may not be a debt to discharge. However, that does not mean the credit card company must keep the account open.
Many credit card companies regularly review bankruptcy filings and credit reports. If they learn that you filed Chapter 7, they may close the account even if you did not owe them money. This is not necessarily because you did anything wrong. It is often simply the lender’s policy.
Can I Choose to Pay One Credit Card and Keep It?
Usually, you should not pay one unsecured credit card while discharging others without first speaking with a bankruptcy attorney. Bankruptcy generally requires fair and accurate treatment of creditors. Paying one creditor shortly before filing can create preference issues, especially if the payment is large or made to a creditor connected to you.
Credit card companies also are not required to continue doing business with you simply because you paid the balance. You may pay the card off and still have the account closed after filing.
Reaffirming Credit Card Debt Is Uncommon
Some secured debts, such as vehicle loans, may involve reaffirmation agreements in Chapter 7. Credit card debt is usually unsecured, and reaffirming it is uncommon and often not advisable. Reaffirming a debt means you agree to remain personally responsible for it after bankruptcy.
One of the main purposes of Chapter 7 is to eliminate qualifying unsecured debt. Agreeing to keep paying a credit card after bankruptcy may defeat part of the benefit of filing. Before signing any reaffirmation agreement, you should fully understand the consequences.
Using Credit Cards Before Filing Can Create Problems
You should be careful about using credit cards before filing Chapter 7. Recent charges, luxury purchases, cash advances, balance transfers, or large spending shortly before bankruptcy may lead a creditor to object to discharge of that debt. The creditor may argue that the charges were made without intent to repay.
If you are considering bankruptcy, stop using credit cards and speak with a bankruptcy attorney before making additional charges. Continuing to use credit after deciding to file can complicate the case.
What Happens After Discharge?
After a Chapter 7 discharge, qualifying credit card debt is generally eliminated. A discharge means the creditor can no longer try to collect that discharged debt from you personally. The U.S. Courts explain that a discharge releases the debtor from personal liability for certain debts and prevents creditors from taking collection action on discharged debts.
After discharge, you may begin rebuilding credit. Some people receive credit card offers soon after bankruptcy, but the terms may include high interest rates, annual fees, or low limits. A secured credit card may be a safer way to rebuild credit if used carefully and paid in full each month.
Rebuilding Credit the Right Way
Losing existing credit cards does not mean you will never have credit again. Many people rebuild after Chapter 7 by using a budget, paying all remaining obligations on time, reviewing credit reports, maintaining stable bank accounts, and using new credit cautiously.
The goal after bankruptcy should not be to immediately replace old debt with new debt. The goal should be to rebuild financial stability while avoiding the same debt cycle that led to bankruptcy.
Talk to a Tulsa Chapter 7 Bankruptcy Attorney
In most Tulsa Chapter 7 bankruptcy cases, you should expect credit card accounts to be listed and closed. You generally cannot pick which unsecured credit cards to discharge and which ones to keep if money is owed. Even zero-balance cards may be closed by the lender after the bankruptcy filing. If you are considering Chapter 7 and want to understand how bankruptcy will affect your credit cards, call 918-739-8894 or contact South Tulsa Bankruptcy Lawyers to schedule a free consultation.
