What Happens to Your Credit Cards During Bankruptcy
by Richard Fonfrias,
J.D. Chicago’s Financial Rescue &
Fonfrias Law Group, LLC
Most bankruptcy trustees allow you to keep your credit cards are your meeting with creditors.
In most cases, bankruptcy trustees will not require that you surrender your credit cards at the meeting of the creditors. Often, this is because trustees don’t have the legal authority to require you to do this. Even so, some courts or trustees may still ask that you relinquish them. The questions below will help clarify this issue:
“What will happen to my credit cards during bankruptcy?”
At the time you file for bankruptcy, you list your creditors in your paperwork. Then the court sends a notice to your creditors telling them that you filed. At that time, most credit card companies will cancel your card. So it serves no purpose for the trustee to ask you to surrender your credit cards.
“How important is it for me to list all of my credit card debt in my bankruptcy paperwork?”
Important? It’s mandatory. You must list all of your debts in your bankruptcy paperwork. This includes every credit card on which you have a balance. However, if you have a zero balance on a credit card, then it is not a debt and you don’t have to list it.
If you don’t list a zero-balance credit card, then the lender won’t get a notice of your bankruptcy from the court. Even so, bankruptcy filings are public records, which means the information will go to credit bureaus and be listed on your credit report. So the credit card company will probably learn about your bankruptcy anyway.
“Do I have to give up my credit cards at the meeting of the creditors (the 341 hearing)?”
Generally, trustees in most jurisdictions won’t ask you to give up your credit cards at the meeting of the creditors. Still, in some jurisdictions, trustees may ask that you surrender them. But even if you don’t give up your cards, the lender will usually cancel them when it receives notice from the bankruptcy court.
Don’t forget, however, that the law does not permit the court or trustee to force you to give up your cards. If you’d like to retain certain credit cards, you can challenge the trustee’s request. And if you want to keep the cards for a good reason, the trustee usually won’t object.
“Will I be able to keep my credit cards after my bankruptcy?”
After you file bankruptcy, you might be allowed to keep a credit card if you “reaffirm” it. This means you sign a new contract with the credit card company and you agree to personally guarantee the credit card debt. By doing this, you cannot discharge what you owe on this card in your bankruptcy. Since most debtors file bankruptcy to get rid of credit card debt, before you reaffirm the debt, make sure you talk with an experienced bankruptcy lawyer.