What Happens to My Credit Cards if I File for Bankruptcy in Pennsylvania?
People who file for bankruptcy often have overwhelming credit card debt, making bankruptcy an attractive option to start anew. Whereas individuals are allowed to file either Chapter 7 or Chapter 13 bankruptcy, both options typically result in any open credit cards being canceled. If there is an outstanding balance on any of your cards, this must also be accounted for in your bankruptcy filing.
The bankruptcy process is complex, requiring dedicated counsel to guide you along the way. If you are considering or have begun the process of filing for bankruptcy, our PA bankruptcy debt relief attorney at Audi Law, PLLC, is here to address any of your concerns.
Who is Eligible to File Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is an option for individuals, partnerships, corporations, or other business entities who are looking to “wipe the slate clean.” Solvent or insolvent individuals are eligible, with no debt limit applying.
However, you must pass the means test to determine if you qualify under Chapter 7. The means test involves calculating your average gross monthly income and multiplying that figure by 12 to determine your annual income. If you make less than the state’s median income ($57,919 in Pennsylvania as of 2024), then you may be eligible for Chapter 7 bankruptcy. If you make more, then a PA bankruptcy debt relief lawyer can help you discern whether a Chapter 13 filing may be right for you.
What Happens to My Credit Cards When Filing Chapter 7 Bankruptcy?
Under Chapter 7, you will need to list all secured and unsecured debts. A secured debt is any debt backed up by collateral (like a car loan), while an unsecured debt is a debt that is not backed up by collateral (such as medical bills, student loans, and credit card balances).
Once you file a Chapter 7 petition, credit card companies will close any open credit cards under your name. Although you are allowed to apply for a new credit card once all your debt is discharged, you are unlikely to be approved. Since Chapter 7 stays on your credit report for 10 years, it is unlikely that a credit company will approve you during this time.
Chapter 13 Eligibility
Chapter 13 bankruptcy is designed for individuals with a regular source of income who want to restructure their debt. Unlike Chapter 7, individuals filing Chapter 13 bankruptcy can only have a total of $2.75 million in secured and unsecured debts. Under Chapter 13, a repayment plan will be developed, which gives a person three to five years to pay off their debt. Under Chapter 13, you will make payments to a Chapter 13 trustee who will subsequently pay your creditors.
If your home is in foreclosure, a Chapter 13 filing initiates an “automatic stay,” immediately stopping foreclosure proceedings. However, anyone who has filed for bankruptcy within the past 180 days will be prohibited from filing either for Chapter 7 or Chapter 13.
What Happens to My Credit Cards When Filing Chapter 13 Bankruptcy?
Individuals filing under Chapter 13 will be allowed to keep their credit cards, although it is advised that you do not use them. Chapter 13 remains on your credit report for seven years, so it is unlikely that you can take out new credit cards during this period. If you need to take out a car or any type of loan during this time, it is best that you speak with a PA bankruptcy debt relief attorney who can advise you accordingly.
Consult with a PA Bankruptcy Debt Relief Lawyer Today
Filing for bankruptcy can be a stressful experience if you do not have experienced counsel by your side. In some situations, filing for bankruptcy is not always the right choice. If you are considering bankruptcy but are worried about keeping your credit cards, our PA bankruptcy debt relief attorney can help you explore your legal options. To schedule your consultation, contact us online or give us a call today.