Can I Use my Credit Cards after Bankruptcy?

Can I Use My Credit Cards After Bankruptcy?

Reestablishing their good credit score is a top priority for most debtors. One way to do just that is by paying your current obligations on time: your mortgage, your car note and any other secured debts that you may have. Responsible use of credit cards is another good way to raise your credit score.

Before filing

Be aware that many creditors cancel a consumer’s credit card upon a bankruptcy filing, even if there is little or no outstanding balance. Also be aware that if you make any large purchases on credit in the 90 days prior to filing, such purchases may be presumed fraudulent. The creditor still has to prove fraud in court; in other words, the creditor must prove that you intended to file bankruptcy when you bought that big-screen HD TV or charged your way to and from the Bahamas.

Also, if there is a card you want to keep, consider reaching out to the creditor before you actually file. The moneylender may cancel the card anyway, but you have a much better chance of keeping the account open if you warn the creditor in advance.

After filing

In a Chapter 7, there is legally nothing that prevents you from using your existing credit cards or even obtaining new ones. Practically speaking, that may not be possible or practical, for financial reasons.

In a Chapter 13, you generally need the trustee’s permission to take on additional debt. That permission is usually forthcoming as long as you have a legitimate need for the item and the payments fit comfortably within your existing budget.

After discharge

Especially after a Chapter 7, you may be inundated with credit card solicitations after discharge. That’s because the creditors know that you generally cannot file a Chapter 7 for at least six years. To make sure you don’t wind up in bankruptcy court again, resist temptation and continue to use credit sparingly.  Financing consumables is a recipe for disaster.  You can put a new transmission on a credit card and pay it off in a reasonable time according to a plan.  You can also put your groceries on a credit card if you paid cash for the transmission and are therefore a little short this month, and pay the balance in full from your next paycheck.  However, if you put your groceries, gas, utilities, or other consumables on your credit card regularly and pay less toward you bill each month than you charge, unless you increase your income, you will eventually build up a balance you cannot afford to service, and you will be right back in bankruptcy.

For a free consultation with attorneys who help you file bankruptcy, contact our office in Melbourne, Florida.

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