Bankruptcy has become a common term in our society, especially following the housing crisis of 2009. Yet there remain a lot of questions about what you can and can’t do during or after taking this debt-reducing step. For those who have made credit cards a major part of their life, a common question is whether you can or can’t keep any of your current or old credit cards once you have filed. The answer to this and whether it’s a good idea to get a credit card after a bankruptcy may surprise you.
Credit Cards After Bankruptcy
Going through a bankruptcy can feel like the biggest personal and financial failure of your life – and credit cards are often at the root. So, it might seem counterintuitive to get another card or keep current cards. However, there are circumstances in which having a credit card right after a bankruptcy makes sense. Some of those include the following:
- You want to start re-establishing good credit quickly
- Your liquid assets have been minimized
- You need credit cards for frequent car rentals, flights, etc.
It may come as a surprise, but there are countless institutions willing to issue credit to someone fresh off a bankruptcy. But keep in mind that those cards will often come with very high interest rates. Make sure you can afford the credit card and won’t just start back down the road to bankruptcy.
Do You Have to Get a New Card?
You don’t necessarily have to get a new credit card after a bankruptcy to have a revolving money source. During your bankruptcy, any card on which you owe money will be listed among your debts. Oftentimes you can keep those cards if you reaffirm the balance and enter into a new agreement. This does, however, mean your debt won’t be discharged fully in your bankruptcy, so it’s worth weighing how important the credit card is.
Keeping a credit card with a zero balance may be a better idea. These cards don’t have to be listed among your debts on a bankruptcy. However, if the issuer learns about your bankruptcy, don’t be surprised if your interest rates skyrocket.
Credit cards can be very helpful, offering a valuable financial resource for specific types of purchases. But when their revolving debt gets out of hand, bankruptcy can be the end result. Talk to your credit card lawyer to get advice if you’re considering keeping credit cards or getting new ones after you file.