Can I File for Bankruptcy and Still Keep Some Credit Cards?
According to the Federal Reserve Bank, Americans owe a collective sum of $1.21 trillion in credit card debt. This type of debt often leads to bankruptcy, and those who successfully file for bankruptcy in this situation may become extremely wary of misusing credit cards ever again. That said, credit cards have become an integral part of interacting with the US economy. Without a credit card, it might become difficult or downright impossible to rent vehicles, stay at hotels, and access many other services. Can you keep some of your credit cards after filing for bankruptcy in Hershey, PA?
Why Keeping Credit Cards Could Be Challenging During Chapter 13 Bankruptcy
When you file for Chapter 13 bankruptcy, you create a repayment plan. As long as you adhere to this plan and start paying back your creditors, you may not have to liquidate any of your assets. So does this mean that you can also continue to use your credit cards? The answer is usually no.
A credit card is not an asset. In fact, it is the opposite: A liability. While Chapter 13 bankruptcy offers numerous benefits compared to Chapter 7 bankruptcy, it also presents various restrictions. One of these restrictions is the inability to accumulate more debt unless you get permission from the bankruptcy court.
Every time you use your credit card, you are accumulating more debt. Unless you get permission from the bankruptcy court for each of these purchases, you are likely breaking the rules of Chapter 13 bankruptcy.
Furthermore, using a credit card during Chapter 13 bankruptcy shows that you are more willing to pay back certain creditors rather than others. Suppose you owe $20,000 to a utility company. When this creditor sees that you are continuously paying off your credit card bill during Chapter 13 bankruptcy, they may argue that they should receive this money instead. In the eyes of the court, this is a fair point.
That said, you may be able to maintain a business credit card during Chapter 13 bankruptcy. However, you must get permission from the bankruptcy court first, and you may need to prove that your normal business operations would be impossible without a company credit card.
What About Chapter 7 Bankruptcy?
The same general logic applies to Chapter 7 bankruptcy. Once you file, your credit cards will be canceled. You will have to wait until your debt is discharged before reapplying for new credit cards, although you should be prepared for rejection. Many lawyers recommend that their clients stop using their credit cards months before filing for bankruptcy if possible.
Can a Bankruptcy Lawyer in Hershey, PA Help Me?
If you have questions about bankruptcy in Hershey, PA, you might want to speak with a lawyer. These legal professionals can help you learn more about the bankruptcy process. You can also ask specific questions during a consultation if you’re wondering whether you can keep some of your credit cards. Continue this conversation today by contacting Audi Law, PLLC at 717-707-5611, or visit us online.