Bankruptcy and Credit Cards

Out of control credit card debts are one of the most common reason for individuals to consider filing bankruptcy.  Credit card debts are unsecured debts.  Unsecured debts are not tied to, or secured by, any collateral or personal property.  Compare this to mortgages and car loans that are secured debts and are tied to, or secured by, your home, car, or other property evidenced by a security agreement.  Therefore, if you cannot pay your credit card debts, the creditor cannot automatically take your home or any personal property.  They will have go through other legal means to get paid.

Upon a successful bankruptcy filing, all your credit cards will be discharged or wiped away.  Unless the creditors can prove fraud or other improper acts by the debtor, a bankruptcy will usually zero out the credit card debts.

When you file for bankruptcy, you will list all your credit card debts in the filing.  You should always check (and double-check) that you have listed all your credit cards on your filing.  If a creditor is inadvertently left off the schedule, you could risk the possibility that you will still owed the unlisted debt.

You should also be very careful how you use your credit cards 3 to 5 months before you file for bankruptcy.  Bankruptcy courts will not look favorably upon a debtor that makes significant purchases and draws on the credit cards with the obvious intention of not paying for it.  You should try to avoid using the credit card at all as soon as you intend on filing for bankruptcy.

Finally, although it will be more difficult to get a credit card after your bankruptcy because of the drop in your credit score, it is not impossible.  In fact, you will start receiving mail solicitations about pre-approved cards even before your bankruptcy is discharged.  However, please be very careful with any of these offers because they are usually offered on very onerous and harsh terms.  You also want to avoid getting yourself back into credit card debt after you receive a second chance from the bankruptcy.