Credit Card Debt and Bankruptcy Law
Credit card debt is often a primary concern for those considering either
Chapter 7 or Chapter 13 Bankruptcy protection.
Eliminating Credit Card Debt
More and more Americans have become overburdened with credit card debt: the newest national average totals $16,061, with an average interest rate 18.76%.
Those considering bankruptcy often have higher-than-average credit card debt, and cite credit cards as a primary reason for wishing to file bankruptcy.
Happily, credit card debt can be discharged under both Chapter 7 and Chapter 13 Bankruptcy law. Under Chapter 7, the debt is entirely forgiven; with Chapter 13, the debt is either entirely forgiven, or a portion of the debt could be paid back over 3 or 5 years.
Keeping a Credit Card Through Bankruptcy
If no balance is owed on a credit card, it need not be listed as a debt when filing either Chapter 7 or Chapter 13 Bankruptcy. Often, a filer is able to keep the card through the bankruptcy. Other times, the card gets canceled when the credit card issuer learns of the bankruptcy through routine credit monitoring.
When money is owed on a credit card but the account is current, it may be possible to keep the card under Chapter 7 Bankruptcy. To do so, one may have to sign a reaffirmation agreement, whereby one agrees to pay the balance in full. But doing so still requires court approval. As such, those considering this option should discuss the matter with their bankruptcy attorney.
Obtaining a Secured Credit Card After Bankruptcy
Even when filing bankruptcy results in losing access to all credit cards, it's still possible to obtain a secured credit card, which can be used in virtually the same manner as a standard credit card.
With a secured credit card, the amount of the credit line is equal to the amount of the opening deposit, which need not be a large one.
Secured credit cards are reported to credit reporting agencies, and thus can improve one's credit following a bankruptcy.
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