So you want to file for bankruptcy, but you are wondering if you would be able to keep a credit card after you file. After all, it sure would be nice to have one – just in case of emergency of course. You know better than to get yourself back into debt trouble again with credit cards.
When you file for bankruptcy, you are required to disclose every single person you owe money to. Obviously, all of those credit cards that you have been using over the years probably have a balance on them. If so, then they have to be included in your bankruptcy. When you file, the debt will be completely eliminated for each and every card. The credit card companies will close those cards, and you will be left without a credit card.
What If I Have a Credit Card With a Zero Balance?
A credit card with a zero balance is not considered a creditor because you don’t owe them anything. So you don’t have to include it in your bankruptcy.
Great! So I Can Keep a Credit Card and Still File for Bankruptcy as Long as It Has a Zero Balance, Right?
Well unfortunately, it’s not so clear cut.
Every credit card company periodically monitors your credit. They want to be sure you haven’t become a high-risk individual who they no longer want to do business with. When it comes time to review your credit, your credit card company will learn that you filed for bankruptcy. It will be listed in big, bold letters right on your credit report.
Once they learn that you filed for bankruptcy, they will have two options. One, they may choose to leave your card open and continue doing business with you. Congratulations! You were able to keep your card. Two, they will close your card because of the bankruptcy. Unfortunately, this is the more likely scenario of the two.
Should I Pay Off One of My Credit Cards Before Filing?
In a word, “no.”
Technically, you can pay off a credit card prior to filing. You now know that there is at least a chance you’ll get to keep it after you file. But there is also a chance you’ll lose the card, and the money you spent paying it off was a waste.
Also, if you pay off too big of a balance prior to filing, the bankruptcy trustee might view this as a preference payment. If so, you’ll have to pay that money back to the court, and it will be distributed to your other creditors. Failure to do so could jeopardize your whole case.
Finally, it’s fairly easy to get a new credit card after filing. A good bankruptcy attorney will even help you with this. So why bother keeping an old one with all the risks involved when you can easily get a new one after you file?