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Can I keep a credit card after bankruptcy?

Posted on Jan 17, 2010 in Uncategorized

Clients frequently ask if they can keep a credit card after they file for bankruptcy under chapter 7.  They often think that just because they have a zero balance, the credit card company will still allow them to use the credit card after bankruptcy. 

Unfortunately, we can’t be sure whether or not you’ll be able to keep using your credit cards?

Why? 

Credit cards give you the opportunity to incur debt in the future.  From the standpoint of the credit card company, a credit card is a “financial accommodation.”  Why is this important?  A “financial accommodation” is a special kind of a contract when it comes to bankruptcy. When you file a bankruptcy case, the company which extends you a “financial accommodation” is not under any obligation to continue to do so.  So the credit card company might allow you to keep using it – but then again, it might not. 

If you have “closed end” credit – where you owe money but can’t borrow new money – you’ll have the opportunity to reaffirm the debt and pay it off after bankruptcy.  In exchange, you won’t be held in default and you won’t lose your collateral.  But for “open end” credit, there’s no assurance that you’ll be able to pay as normal and borrow new money after bankruptcy.

So when filing your bankruptcy case, be prepared to move to a cash economy until you rebuild your credit.  And you will rebuild your credit.  Lakelaw Cares and will help you rebuild your credit after bankruptcy.

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