Bankruptcy affects your finances in many ways, including your credit cards. Many people worry about losing every credit card after filing. Keeping credit cards during bankruptcy depends on the type of bankruptcy and how each lender responds. You may lose access to some cards, but not all outcomes look the same.
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“Yes, so credit cards close as part of a bankruptcy getting filed. Even if you have a zero-balance credit card, most likely that is going to close, too. Any balance owed on a credit card is going into the bankruptcy and is going to be discharged as part of the bankruptcy and then any credit card that has a zero balance is also going to close. It is going to wipe the slate completely clean for you to start over with.”
What Happens to Credit Cards in Bankruptcy
Bankruptcy changes your relationship with unsecured debts. In Chapter 7 cases, the court wipes out most unsecured balances, including credit cards. Creditors usually close accounts after discharge. Even cards with no balance often close once the creditor receives notice of the filing.
In Chapter 13 cases, you enter a repayment plan. Some creditors allow continued use if you repay the balance. Others still close the account. The decision rests with the creditor, not the court.
You will likely lose most existing cards, but you can rebuild credit later. Some lenders offer secured credit cards to those who complete bankruptcy. These cards require a deposit and come with low limits. Using one responsibly helps rebuild your credit history.
Schedule a Consultation with a Bankruptcy Attorney
If credit card debt weighs on you, schedule a consultation. We review your debts, assets, and income. We explain the difference between Chapter 7 and Chapter 13. We show how bankruptcy affects your credit cards and your larger financial picture. Contact Kain + Henehan by calling (612) 438-8006 or filling out the online form.
