Can Credit Cards be Kept During Chapter 7 Bankruptcy?

Can Credit Cards be Kept During Chapter 7 Bankruptcy?

Filing for Chapter 7 bankruptcy can be a difficult decision to make, as it can have lasting effects on your credit score and financial future. One question that many people have when considering bankruptcy is whether they will be able to keep theircredit cards. In short, the answer is no.

Why Credit Cards Cannot be Kept During Chapter 7 Bankruptcy

When you file for Chapter 7 bankruptcy, you are essentially asking the court to discharge your debts and give you a fresh start. In order to do this, the court will appoint a trustee to oversee the liquidation of your assets. Any non-exempt assets will be sold, and the proceeds will be used to pay off your creditors.

Credit cards are considered unsecured debt, which means that they are not tied to any collateral. As such, they are typically discharged during bankruptcy. In order to prevent people from running up their credit card debt before filing for bankruptcy, the court will prohibit you from using your credit cards once you file.

What Happens to Your Credit Cards During Bankruptcy

Once you file for bankruptcy, your credit card accounts will be closed by the credit card companies. You will no longer be able to use them to make purchases or take cash advances. In addition, any outstanding balances will be included in your bankruptcy and discharged along with your other unsecured debts.

It is important to note that if you have a co-signer on your credit card account, they will still be responsible for the debt. If you want to keep a credit card during bankruptcy, you may be able to negotiate with your credit card company to reaffirm the debt. This means that you will agree to continue making payments on the debt in exchange for being able to keep the credit card.

Alternatives to Credit Cards During Bankruptcy

While you will not be able to keep your credit cards during bankruptcy, there arealternativesthat you can use to help rebuild your credit. One option is to get a secured credit card, which requires you to put down a deposit that serves as collateral. This can help you establish a positive payment history, which is important for rebuilding your credit after bankruptcy.

Another option is to get a credit-builder loan, which is a type of loan that is specifically designed to help people rebuild their credit. These loans typically have low interest rates and are secured by a savings account. As you make payments on the loan, your payments are reported to the credit bureaus, which can help improve your credit score over time.

Conclusion

In conclusion, credit cards cannot be kept during Chapter 7 bankruptcy. They will be closed by the credit card companies, and any outstanding balances will be included in your bankruptcy and discharged along with your other unsecured debts. However, there are alternatives that you can use to help rebuild your credit after bankruptcy, such assecured credit cardsand credit-builder loans.

When applying for credit cards, it is important to be mindful of fees and interest rates. Many credit cards come with annual fees, which can add up over time. In addition, high interest rates can make it difficult to pay off your balance and can lead to more debt. It is also important to avoid maxing out your credit cards, as this can negatively impact your credit score.

Overall, credit cards can be a useful tool for managing your finances, but it is important to use them responsibly. By being mindful of fees, interest rates, and your spending habits, you can avoid falling into debt and work towards building a strong credit history.