If you decide to file for bankruptcy, you may wonder what happens to your credit cards and if you can keep one of them for life after bankruptcy. The answer is complicated; it depends on the decisions of the bankruptcy officials, meaning the court and the trustee, and the credit card company itself. The credit card company has the freedom to make decisions regarding your account independently of the bankruptcy officials. Therefore, even if the court allows you to keep a credit card, the company may cancel it anyway.
Bankruptcy Court
During your 341 hearing, the bankruptcy court or trustee may request that you turn over your credit card(s). However, this request is neither mandatory nor enforceable. You can oppose the request, and the trustee usually will not force the issue if you have a good reason.
When filing, you have to report all your debts to the bankruptcy court. However, if you have one or more credit cards on which the balance is zero, you do not have to report it. This means that the credit card company will not receive a notice of your bankruptcy from the court.
Credit Card Company
Just because the court does not inform the credit card company of your bankruptcy directly, it doesn’t mean that the company will not find out about it. Bankruptcy filings are public records, so it is possible that the credit card company will find out about it that way. If the credit card company finds out about your bankruptcy, it may decide to cancel your card even if you do not carry a balance on it.
Reaffirming your credit card debt may be a way to prevent the company from cancelling your account, but it is risky and inadvisable in most cases. The reason that credit card companies want to cancel your credit cards when you file for bankruptcy is that the filing cancels your existing contracts, meaning that the company cannot compel you to pay. Reaffirming your credit card debt means entering into a new contract with the company in which you agree to pay what you owe. It means that the balance that you carry on a card that you are reaffirming cannot be discharged in bankruptcy, which makes it a potential problem if you carry a large balance. However, if you owe little to no debt on a card, reaffirming it may satisfy the company and allow you to keep it after bankruptcy.
A bankruptcy lawyer in Melbourne, FL can explain exceptions and options relating to your bankruptcy. Arrange a consultation by contacting a law office.
Thanks to the Law Offices of Arcadier, Biggie & Wood for their insight into bankruptcy and credit cards.
