In most bankruptcy cases in Massachusetts, credit card companies will not allow you to keep your credit cards after filing bankruptcy. The good news is that after you file, and the bankruptcy is finalized, you will immediately start rebuilding your credit.
It is common for most filers to want to exclude particular debt from their bankruptcy filing. Maybe a credit card used for work, or credit cards used for other expenses the filer deems necessary.
However, when you file, you must gather and list all of your debt no matter how small or large, and no matter how vital the credit card, for instance, might be to the filer. Simply, if you owe a creditor money, they must be listed on the bankruptcy petition.
Even if you don’t owe a balance on your credit card, you must still list it in your bankruptcy papers, which a Massachusetts bankruptcy attorney can help you prepare. A revolving credit card account is a type of contract, and your contracts are automatically canceled through bankruptcy, and this includes credit cards, leases, and secured auto loans.
Once your credit card company or any other creditor finds out about your bankruptcy, that contract is canceled. The credit card company has no way of enforcing any monetary obligations. Therefore they will cancel the entire contract.
If you have a corporate credit card that your employer provides you with to pay for travel expenses or supplies, you’re either an authorized user or an obligor on the account. This distinction matters because it will determine whether you’ll need to include the account in your bankruptcy paperwork or not. If you are an authorized user on the account, the bill is paid directly by the employer as it is their account. If you are an obligor (and you are all or partially responsible for the bill), you are listed on the account, and it is likely to be canceled in bankruptcy.
All bankruptcy filings and decisions are personalized to the filer. Bankruptcy is designed to help a filer get back on their financial feet, not ostracize them. Your attorney will work with the court to help you successfully reach this goal while enduring the least amount of hardship.
Will I Be Offered Credit After Bankruptcy?
Even though you may lose your credit cards or other forms of secured and unsecured loans during bankruptcy, you will likely secure forms of financing after filing. Sometimes this can be done far sooner than most bankruptcy filers think.
This might be surprising to some filers, but there are reasons for this. Once the chapter 7 bankruptcy is filed, the filer is free of debt and ready to rebuild their credit. A lawyer with experience in credit repair can help. Why is this a good time to take on new debt?
- The filer now has more discretionary income to spend, and creditors know this and want the business.
- Most filers learn from this experience and use their new credit much more cautiously and for less frivolous purposes. In other words, after some time, a creditor might deem the filer a better risk after a bankruptcy as they know the filer does not want to go through this process again. They have become more prudent and wiser as to the handling of their credit.
- In Massachusetts, the filer cannot file for another seven years (or more), so the creditor has lots of time to initiate action against them if needed.
Working with your bankruptcy attorney, you can decide when, how, and if it is wise to start rebuilding your credit immediately. Your attorney can create a personalized plan for you to obtain new credit, explain how to go about it, and help determine what types of credit are the most beneficial at the time.
How Can I get Credit Cards or New Credit After Bankruptcy
- Make sure your credit report accurately reports your bankruptcy. This may seem like something you don’t want to do, but it helps. Your credit report should show a $0 balance for any accounts that have been discharged through bankruptcy. Raise a flag with the credit reporting agency if any of your discharged debts are shown as active, and get it corrected.
- Keep paying non-discharged debts on time. Sometimes, not all your debts will, or can be discharged by your bankruptcy – such is the case with student loans. Make sure you pay the remaining balances on time.
- Avoid credit repair companies. Some companies claim they can remove a bankruptcy from your credit report. This is simply not true. They will most likely take your money, and you’ll get little or nothing in return. Get new credit. Securing new credit is one of the biggest hurdles to get over in post-bankruptcy credit repair, but it’s also one of the most critical steps to rebuilding your credit. Some credit cards approve applicants who have a bankruptcy because they know that by law, you can’t declare bankruptcy again for at least another seven years or more.
There are retail, gas cards, and secured cards that tend to have lower qualification standards than other unsecured cards. These loans and cards will come with more restrictions and higher interest rates than you could get with better credit. Still, they open the door for you to start rebuilding your credit reputation.
- Keep your new credit card balances low, and pay them on time. Consumers with the best credit scores keep their credit card balances low. This isn’t about how much of your balance you pay off every month, but rather how much you charge in the first place. Keep your balances less than 30% of your credit limit, and less than 10% if possible.
Your bankruptcy attorney will advise you about all the ways to rebuild your credit. Remember, although the bankruptcy process may seem overwhelming and complicated, your attorney can help you. Bankruptcy is a process designed to help the consumer. By working with an experienced attorney, you can get your life and finances back on track.