Given that credit cards are needed for everything from booking hotel reservations to renting a car, you might be asking yourself, Can I use credit cards after filing a personal bankruptcy? If overspending was the cause of your financial challenges, then you certainly want to avoid the pitfalls that led to your fiscal worries, but you still need to know if you can use credit cards after bankruptcy when it’s absolutely critical.
Cards You Already Have
If you have credit cards when you file bankruptcy, then any card on which you owe money will be listed among your debts; however, most companies will allow you to keep the card if you reaffirm the balance and enter into a new agreement.
- Ultimately, creditors will make the decision of whether this is an option in your specific case, but the majority of companies don’t want to incur loss because of discharged debt.
- On the other hand, if you have cards with a zero balance at the time of your bankruptcy, then you don’t have to list them among your debts. While that also means that you don’t have to notify credit card companies of your bankruptcy filing, chances are that they may still find out about your situation. That could potentially lead to higher interest rates, so be aware of that possibility.
Cards You Want to Get
If you want to get a new credit card after filing bankruptcy, then a secured card is excellent for both access to a credit card and the re-establishment of your credit.
- These cards will require you to deposit a cash sum in a savings account in the amount of your desired credit limit, e.g., $500. Although that may not seem like much, remember that it’s a start on the road to financial recovery.
- When you make purchases, the amount will be deducted from your savings, which you must then pay back as you would a monthly credit card bill.
- Be certain not to spend the maximum amount of your card. A good rule of thumb is to charge no more than 30% of your limit so that you can comfortably pay the balance in full each month.
Look for a secured card that doesn’t have an application cost, charges a reasonable annual fee and converts to an unsecured card after about 18 months of on-time payments. Most importantly, make sure that the card issues reports to the three major credit bureaus—Equifax, Experian and TransUnion—since you want to improve your credit score in the process, but also try to get a card that isn’t identified as a secured card on your credit report. If it is, it may alert potential creditors of your past difficulties, so look for a card that simply reports your responsible and timely payments.
Getting Help
If you are confused about any aspect of your bankruptcy, such as whether you can use credit cards after filing, you should consult with your bankruptcy attorney. He can help you to understand exactly what impact bankruptcy will have on your debts and can assist you in making the best financial decisions during your bankruptcy and after.
