How to Deal With Your Credit Cards after Bankruptcy

How to Deal With Your Credit Cards after Bankruptcy

Will you be able to keep your credit cards after you file for bankruptcy? The answer is not that straightforward, according to Steve Westerfield, a Hot Springs AR lawyer with 32 years of experience in legal practice as a sole practitioner. He explains how and why here.

List All Credit Cards

For people who are filing a bankruptcy petition, it is necessary to list all credit cards upon which any debt is owed. Each listed card will almost certainly be revoked by the card issuer after the bankruptcy petition is filed.

If you have a credit card or cards upon which there is no balance, then you do not have to list that card. In the vast majority of cases, the issuer of any non-listed credit card will not cancel the credit card.In rare occurrences, however, creditors will do a random credit check on account holders. If that happens, the card issuer will probably cancel an account even if there is no debt owed.

Stop Using Credit Cards

You should stop using your credit cards once you realize the need to file bankruptcy. If credit cards are used within 90 days of a bankruptcy filing, thecredit card companies can review the charges in an effort to determine whether credit card abuse has occurred. After filing bankruptcy and receiving a bankruptcy discharge, you can use any remaining credit card freely at that time.

However, you will not want to fall back into the same debt problem that caused you to file bankruptcy in the first place. In addition, you should never make cash withdrawals on a credit card if you think you may have to file bankruptcy. Cash withdrawals made within six months of filing bankruptcy may not be dischargeable.

Avoid Second Mortgage Mistake

One mistake that many debtors make is the decision to get a second mortgage on their homes in order to pay off high-interest credit cards. However, often the individual finds it very difficult to make a second mortgage payment and ultimately may find himself in foreclosure proceedings if he falls behind on his second mortgage or primary mortgage.

Some states do not allow a person to borrow money on a home in order to pay unsecured debt (like credit cards). However, many states, including Arkansas, do allow that to be done because of the danger of potential foreclosure. My office always counsels against obtaining a second mortgage loan just to pay unsecured debt.

Seek Legal Counsel

It's wise to seek legal counsel to determine the best course of action if you are having debt problems. Often, legal counsel can make suggestions that will be helpful, even without filing bankruptcy. A good lawyer can give advice that will help you avoid making mistakes thatcould make your problems even worse or complicate a later bankruptcy.

For people in Hot Springs, AR or any of the surrounding areas, I recommend giving my office a call to discuss your debt problems in more detail. We can work together to come up with a solution to give you a fresh start.

This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.

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