Can I keep a Credit Card When I File for Bankruptcy?
The idea behind the bankruptcy law is to allow the honest debtor a fresh start financially by eliminating all of the debts owed by the debtor.
Why then, would someone want to keep a credit card even though they are filing bankruptcy?
I think the question is rooted in the fear many people have that, without access to a credit card, “what will I do in case of an emergency?” I remember when I was an impressionable, naive, 18 year old freshman in college, I asked my parents if it would be a good idea to get a credit card. After all, It came with a free t-shirt! They said “Sure, you can use it for emergencies”. Well, I found that there were plenty of situations, that, in my mind, qualified as an emergency, and therefore would allow me to employ the services of the trusty credit card.
No doubt, there are legitimate emergencies in life. And, it is nice to have a credit card there to help bail you out of an unexpected mess. But, wouldn’t it be even nicer if you could bail yourself out of that emergency situation? Why not take that fresh start you’re being offered through the bankruptcy process and use it to rid yourself of the mindset that credit cards are the answer to life’s emergencies? After all, once your debts are discharged through the bankruptcy, you are free to pay yourself a “minimum” payment of, say, $100/month and to send that payment to your savings account instead of sending it to the credit card companies.
Within a surprisingly short amount of time, you can create an impressive emergency fund. Get a flat tire? You’re covered. Tooth starts aching and need to run to the dentist? No need to pay for that trip to the dentist for a year after your tooth is fixed if you have an emergency fund available to cover the cost.
Filing bankruptcy requires that the Debtor list all of his or her creditors in the bankruptcy petition. This is something I advise all of my clients to do, and that everyone who files for bankruptcy declares under penalty of perjury has been done. I’m not as naive as I was in college, so I know that not all of my clients listen to my advice and adhere to it.
I know, for example, that some clients have tried to keep a credit card out of their bankruptcy in the hopes that they could use it. Problem is, even if you don’t list a credit card in your bankruptcy petition, your creditors will know you’ve filed (they subscribe to services that flag accounts of their customers who file for bankruptcy) and they will deactivate the account. Then, you’ve got no credit card and no disclosure of the debt in your bankruptcy. Not good.
Why not free yourself from that ball and chain and take control of your financial life by saying “goodbye” to the idea that you need a credit card to help you out of a jam and, instead, rely on the emergency fund that YOU created!
