Filing for bankruptcy is a significant financial decision that can have a lasting impact on your credit and financial health. One of the most common concerns people have when considering bankruptcy is what will happen to their credit cards. In this article, we will explore the effects of bankruptcy on your credit cards and how O1ne Mortgage can assist you in your journey towards financial recovery.

Do I Have to List All My Credit Cards When I File Bankruptcy?

Yes, when you file for bankruptcy, you are required to list all your open credit card accounts as creditors, even those with zero balances. This is because the bankruptcy trustee assigned to your case needs to review all account activities in the months leading up to your bankruptcy filing. This ensures that no preferential payments were made to any single creditor, which could be seen as unfair to other creditors.

Can You Keep Any Credit Cards After Filing for Bankruptcy?

It is legally possible to keep a credit card after bankruptcy if it has no balance at the time of your filing and the issuer chooses not to cancel it. However, these instances are rare. Most credit card contracts include clauses that call for card cancellation in the event of bankruptcy, even if there is no monetary loss on the account.

What Happens to Your Credit Cards After Bankruptcy?

Whether you file for Chapter 7 or Chapter 13 bankruptcy, your credit card accounts will be affected similarly. Here’s what typically happens:

Accounts With Balances Must Be Listed as Creditors

All credit cards with unpaid balances must be listed as creditors in your bankruptcy filing. The court will notify these creditors, and most card issuers will cancel your account upon receiving this notice.

Cards With Zero Balances Will Likely Be Canceled

Even if a credit card has no balance, there is a good chance it will be canceled. Bankruptcy filings are public records and are listed on credit reports. Credit card issuers routinely monitor customers’ credit reports and may cancel accounts upon discovering a bankruptcy filing.

Reaffirming Credit Card Debt

Federal law allows you to exempt certain debts from being discharged in bankruptcy, a process known as reaffirming the debt. While this is usually used to keep essential assets like a house or car, it can theoretically apply to credit card debt. However, reaffirming credit card debt is often not practical or advisable due to the unpredictable nature of credit card payments and the likelihood that the issuer will close the account anyway.

What About Authorized-User Accounts?

If you are an authorized user on a credit account, you are not legally responsible for any balance on the account and do not have to include the card in your bankruptcy filing. The account owner’s credit standing will not be affected by your bankruptcy. However, if you owe reimbursements for charges made on a company card, you must list the company as a creditor.

Does Filing for Bankruptcy Clear Your Credit Card Debt?

Yes, filing for bankruptcy can discharge unsecured consumer debt, including unpaid credit card balances. This means that you are no longer legally obligated to repay these debts.

The Bottom Line

While it is unlikely that you will be able to keep a credit card after filing for bankruptcy, you will be able to get a new card eventually. A Chapter 7 bankruptcy remains on your credit report for 10 years, and a Chapter 13 for seven years, but their negative impact lessens over time. Many bankruptcy filers start receiving credit card offers within a year or two of filing. These offers typically come with high interest rates and modest borrowing limits, but using them responsibly can help you rebuild your credit.

You can also consider a secured credit card, which requires a cash deposit that usually serves as your credit limit. Making timely payments on a secured credit card can benefit your credit history and help improve your credit scores.

Contact O1ne Mortgage for Your Mortgage Needs

At O1ne Mortgage, we understand the challenges that come with financial recovery after bankruptcy. Our team of experts is here to help you navigate your mortgage needs and find the best solutions for your situation. Call us today at 213-732-3074 to discuss how we can assist you in achieving your financial goals.