For many, the thought of living life without a credit card is terrifying. The credit card has replaced a savings account as the go-to resource when an unexpected expense comes up or for those that simply aren’t making ends meet. Because of this, when I initially meet with bankruptcy clients they will often ask if they can keep just one card in case of an emergency or to use if they need to rent a car.
The answer is generally no. In bankruptcy you are required to list all of your creditors that you currently have a balance with. If you have a credit card that doesn’t have a balance you would not have to list it as a debt, but it is still likely that your access to credit on that card is not going to be there for much longer.
In the old days – and by old days I mean five years ago – I would have credit card companies that would be willing to reaffirm a debt. Meaning that they would be will to keep your credit line open if you signed a new contract agreeing that their debt would not be discharged in your bankruptcy. However, it has been a long time since I have seen any of the credit card companies show any willingness to enter into such an agreement.
After your bankruptcy case is filed, the bankruptcy court will send out notice to all of the creditors you listed in your bankruptcy documents. These creditors will immediately terminate any credit line you may have with them.
The various credit reporting agencies (Equifax, Transunion, Experian) will be notified and your bankruptcy will show up under the Public Records section of your report. Many of your creditors monitor your credit report and once they see that you filed for bankruptcy will often cut you off at that point. This means that even credit cards where you don’t have a balance will likely be terminated after your bankruptcy case is filed.
Life With No Credit Cards
So now what are you going to do? You can survive without credit cards. It takes more self discipline and requires that you start to save a little of each paycheck, but it can be done. One thing that surprises many of my clients is within weeks of filing bankruptcy most of them get flooded with credit card offers. They are bad offers with very high interest rates, but offers nonetheless. I wouldn’t recommend jumping into the credit card game so quickly.
My recommendation is to get a secured credit card where you are required to put some cash down and then you will be issued a credit card in that amount. A good place to find many of the secured credit cards out there is www.bankrate.com . These give you some of the flexibility of a credit card but none of the downside of you slipping back into the debt trap so soon after bankruptcy.