Credit Cards and Bankruptcy
One of the most common questions bankruptcy attorneys hear from clients is whether or not they can keep any of their credit cards when they file.
It’s not a surprising question. After years of relying on credit cards as a security net or for the occasional splurge, the idea of giving up all of your plastic can be a little alarming. This is especially true when you consider everything else you might have to give up if you choose to file.
Unfortunately, if you are planning to file for bankruptcy, you won’t be able to keep any credit cards. Bankruptcy doesn’t allow you to pick and choose what debts you want to be included in your bankruptcy or which you want to keep active, aside from some of the exemptions you’ll be able to declare. Instead, bankruptcy aims to treat all creditors fairly and ensure each debt is repaid or discharged based on the priorities set by the trustee.
One of the most common issues that arise when someone is filing for bankruptcy is listing creditors. Many people assume if a credit card account has a zero balance they don’t need to list it when they file for bankruptcy.
This is not the case.
All active accounts, even those with zero balances, must be listed on your bankruptcy petition. If you fail to list a zero-balance account and the account holder is alerted to the fact that you filed for bankruptcy, they will revoke your borrowing privileges immediately.
Furthermore, any accounts you withhold when you file will not be eligible for discharge now or in a future bankruptcy. So if you withhold an account in hopes of using it during and after your bankruptcy, then you accumulate a large balance on that withheld account and you’re forced to file for bankruptcy a second time, that withheld card won’t be eligible for discharge.
The good news is you don’t need to keep any existing cards active when you file because chances are good you’ll be able to get a credit card after you file. US News & World Report has provided this information on getting a credit card post-bankruptcy.
Company Credit Cards and Bankruptcy
One of the most common reasons people want to withhold a credit card from their bankruptcy is because it’s a business card. If your employer has issued you a credit card in your name to pay for work-related expenses, filing for bankruptcy can affect that card. You’ll need to list it in the bankruptcy if you have any liability to the lender under the terms of the card.
How do you know if you’re liable? You can usually tell by examining where the monthly credit card statements are delivered.
If the monthly statement for your company card goes directly to your employer, that’s who’s responsible. If the statement comes to you and you pay it and then submit a request for reimbursement, you’re the liable party.
If you have any personal liability for a credit card, even if it’s used for business expenses and your employer reimburses you, the card must be listed on your bankruptcy petition. And chances are if you’re liable for your company card it will be closed as soon as you file for bankruptcy.
It’s important to speak to your employer if you’re using a company card that’s included when you file for bankruptcy because the last thing you want is for your employer to be notified by the credit card company that the account was closed.
Credit Cards and Your Bankruptcy
Bankruptcy can be a complicated process and all too often, people who try to go it alone have their cases dismissed. One of the most important things you can do to protect your chances of a successful bankruptcy is to work with an experienced professional.
For more information or to schedule a time to discuss your bankruptcy, contact the Law Office of Robert M. Geller at 813.254.5696 to schedule a consultation.