The ability to keep credit cards while filing for bankruptcy depends on several factors, including the type of bankruptcy you’re filing, the terms of your credit card agreements, and the discretion of the bankruptcy court. Below is a breakdown of the key considerations regarding bankruptcy and credit cards. For personalized advice or information on a potential bankruptcy case, reach out to our bankruptcy lawyers at Reed Law Firm P.A. today.
Chapter 7 Bankruptcy
In Chapter 7 bankruptcy, most of your unsecured debts are discharged, meaning you are no longer legally obligated to repay them. However, this type of bankruptcy usually requires the liquidation of non-exempt assets to repay creditors to the extent possible. In most cases, your credit card accounts will be closed by the issuers as soon as they learn of your bankruptcy filing. Using credit cards after you’ve decided to file for Chapter 7 can be problematic as it may be seen as an attempt to incur new debt without the intent to repay it.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy involves a structured repayment plan that allows you to retain your assets while paying off a portion of your debts over a specified period, typically three to five years. In this type of bankruptcy, you are unlikely to be able to keep pre-bankruptcy credit cards. There may be limited circumstances when you can keep one, but it will require court approval and you’ll likely need to provide detailed information about your income, expenses, and the necessity of each credit card to demonstrate that it’s essential for your daily life or business. Even if the court allows you to keep certain cards, they may have low credit limits and may not be used for luxury expenses.
Secured Credit Cards
If you have secured credit cards, where you’ve deposited a security deposit as collateral, you may be able to keep using them during and after bankruptcy, especially in Chapter 13. These cards are treated differently because they are backed by your deposit and do not represent new credit extended to you.
Credit Card Agreements
Credit card agreements often contain clauses that allow the issuer to close your account or reduce your credit limit if they become aware of a bankruptcy filing. It’s essential to review your credit card agreements to understand the specific terms and consequences.
Credit Card Use Before Filing
It’s crucial to be cautious about using credit cards shortly before filing for bankruptcy. Excessive or irresponsible use of credit cards in the months leading up to bankruptcy can be viewed as fraudulent or non-dischargeable debt by the bankruptcy court.
Consult with a South Carolina Bankruptcy Lawyer
Whether or not you can keep credit cards while filing for bankruptcy depends on your unique circumstances, the type of bankruptcy you choose, and the discretion of the court. It’s essential to consult with a bankruptcy attorney who can provide guidance tailored to your situation, ensuring that you make informed decisions regarding your credit card usage during the bankruptcy process.
Reed Law Firm, P.A. is ready to assist you, so please contact us for more information today.
