Can I Keep a Credit Card Out of Bankruptcy? Understanding Exemptions and Retention

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Navigating bankruptcy can be complex. Discover if you can keep a credit card out of bankruptcy with insights from the legal professionals at Chang & Diamond, APC.

When facing the prospect of bankruptcy, many of our clients at Chang & Diamond, APC express concerns about their ability to keep a credit card. It’s a reasonable question considering the role credit cards play in everyday financial transactions. We understand that maintaining a line of credit can be important for managing expenses, especially in uncertain times, and that’s why we’re committed to offering informed guidance on this matter.

As a trusted bankruptcy law firm with over 25 years of experience serving San Diego and Riverside County, we’ve dealt with a variety of bankruptcy cases, ranging from Chapter 7 to Chapter 13 filings, including those involving active military personnel. From our extensive practice, we’ve found that while it’s generally unlikely to keep existing credit card accounts active through bankruptcy proceedings, there are pathways to obtaining new lines of credit post-bankruptcy.

Understanding Bankruptcy

When you face overwhelming debt, bankruptcy can provide a legal pathway to help reset your financial situation. There are two common types of consumer bankruptcy: Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy

Chapter 7, also known as liquidation bankruptcy, may result in the sale of certain assets to pay off debts. A trustee will be appointed to oversee the process. It’s meant for debtors with limited income who cannot repay all or a portion of their debts. Eligibility is determined through a means test, which assesses your ability to repay creditors using your income and expenses. Chapter 7 can offer a fresh start by discharging most unsecured debts like credit card debt and medical bills.

It’s vital to be aware of bankruptcy exemptions that protect certain properties from being sold, ensuring you don’t start afresh with absolutely nothing.

Chapter 13 Bankruptcy

Chapter 13 is a repayment plan that allows debtors to keep their assets and pay back debts over an extended period, typically three to five years. This plan is suited for individuals with a regular income who can handle monthly payments towards their debt. It’s particularly beneficial if you are behind on important bills, like a mortgage, since Chapter 13 can prevent foreclosure and allow you to catch up on arrears.

An automatic stay comes into effect when we file your bankruptcy, halting most collection efforts, including calls, letters, and wage garnishments. This gives you the breathing room needed to reorganize your finances.

Your credit report will reflect the bankruptcy for up to 10 years for Chapter 7 or seven years for Chapter 13. Despite the impact, it is a step towards rebuilding your financial footing. For guidance on credit after bankruptcy, consider consulting with San Diego Credit Repair Attorneys.

Secured Debt vs Unsecured Debt

Both secured and unsecured debts are crucial considerations in bankruptcy. Secured debt is tied to property like a car or house, while unsecured debt has no physical assets backing it. Understanding the difference is key since it affects how debts are treated during your bankruptcy case.

At Chang & Diamond, APC, we’re dedicated to providing the legal guidance and personal attention necessary to help you find the best solution for your unique situation.

Credit Cards and Bankruptcy

It’s important to note that maintaining a credit card through bankruptcy is an exception, not the norm. While bankruptcy eliminates various unsecured debts, it often results in the canceling of all credit cards.

Upon filing for bankruptcy, individuals are required to list all debts, which include credit card debt. A credit card issuer may cancel your card regardless of whether you carry a balance. If a discharge is granted in Chapter 7 or Chapter 13, most, if not all, credit card debts can be eliminated.

It is generally not possible to selectively exclude a credit card from the bankruptcy process. This is to prevent preferential treatment of certain credit obligations over others. 

Secured Credit Cards During Post-Bankruptcy

After bankruptcy, secured credit cards can be a valuable tool for rebuilding your credit score. These cards require a cash deposit that then serves as your credit limit. This deposit helps manage your spending and mirrors the amount you can afford to use, making it easier to control your budget and rebuild your financial standing.

Here’s how secured credit cards can be effective post-bankruptcy:

  • Rebuilding Credit: By making regular payments on a secured card, you demonstrate financial responsibility, which can help improve your credit score over time.
  • Controlled Spending: The deposit you make acts as your credit limit, preventing you from spending more than you can afford and helping you manage your finances better.

It’s crucial to understand the impact of bankruptcy on your credit history. Although your credit score initially drops, you can still receive new credit opportunities, such as offers for unsecured credit cards. These offers should be handled cautiously to avoid falling back into debt.

Additionally, if you are an authorized user on someone else’s credit card, that account may remain unaffected by your bankruptcy, but this depends on the specific circumstances of the account and the bankruptcy proceedings.

How Chang & Diamond, APC Can Help

At Chang & Diamond, APC, we understand the complexities of bankruptcy filings and the concerns you may have about preserving your credit options during the process. We work diligently to analyze your financial situation and provide legal advice tailored to your unique needs. Keeping a credit card out of bankruptcy can be challenging, but with our commitment to your case, we explore every avenue to protect your interests.

Our strategies include:

  • Assessing eligibility for reaffirmation agreements, which may allow you to retain certain assets, potentially including credit accounts, under specific conditions.
  • Explaining the implications of bankruptcy fraud and ensuring that all actions comply with legal standards to avoid adversary proceedings in court.
  • Crafting a concrete plan for rebuilding credit post-bankruptcy, which may encompass the responsible use of secured credit cards to reestablish a healthy credit score.

For those who’ve already experienced the impact of bankruptcy on their credit score, Chang & Diamond, APC can also assist in credit repair, helping pave the way toward financial recovery. We prioritize your peace of mind, offering personal attention to ensure the best possible outcomes. Our commitment to you extends beyond the courtroom — we are your advocates, confidants, and pathway to debt freedom.

Preparing for Bankruptcy with Chang & Diamond, APC

When faced with the challenges of debt and considering bankruptcy as a viable option, understanding the proper steps and preparations is crucial. At Chang & Diamond, APC, we can guide you through the delicate process to ensure a smooth journey toward financial stability.

Initial Considerations

Bankruptcy serves as a legal pathway to help individuals or businesses eliminate or repay their debts under the protection offered by the federal bankruptcy court. Two primary types of personal bankruptcy exist:

  • Chapter 7 which liquidates certain assets to pay off debts.
  • Chapter 13, which allows you to create a repayment plan.

Before filing, we meticulously evaluate your income and expenses, as this will influence the type of bankruptcy for which you are eligible. We also scrutinize your debts to ascertain which might be discharged and which could remain, such as certain taxes, student loans, or child support.

Assets and Exemptions

As we assess your financial situation, we pay special attention to bankruptcy exemptions that may allow you to keep essential assets. We understand the importance of maintaining a semblance of normalcy, which can include preserving your vehicle through a car loan restructuring. Our priority is protecting your interests while ensuring compliance with legal requirements.

Credit Considerations

The possibility of retaining certain credit facilities, like a credit card, is a nuanced area. These decisions hinge on numerous factors like the card issuer’s policies and your bankruptcy details. Post-bankruptcy, rebuilding credit is a critical step toward recovery. Our commitment extends beyond bankruptcy filing—we provide support in credit rebuilding strategies so you can regain your financial footing.

Professional Guidance

We emphasize the value of seasoned legal advice—to protect your financial future and contemplate the implications of every decision during this period. As a dedicated law firm, we’re here to answer questions, negotiate with creditors, and help structure payment plans that suit your altered financial landscape.

For personalized legal advice, reach out to us, and let’s discuss how Chang & Diamond, APC, can guide you toward a debt-free life. Your first step to gaining control over your financial destiny is one phone call away.


Can I Keep Any Credit Cards When Filing for Bankruptcy?

It’s important to understand that all open credit card accounts must be listed as creditors in your bankruptcy filing, even those with a zero balance. This ensures a fair and comprehensive review of your financial situation.

For example, if you file under Chapter 7 bankruptcy, no distinction is made between different types of unsecured debt; credit cards are included here. Unfortunately, this means you cannot exclude any credit card from the bankruptcy process.

Will Bankruptcy Affect My Ability to Obtain Credit Cards in the Future?

Filing for bankruptcy does impact your ability to obtain new credit cards shortly after filing. While bankruptcy can offer a fresh start by discharging eligible debts, it will also be reflected on your credit report, which can influence a lender’s decision.

However, this doesn’t mean you are barred indefinitely from obtaining credit cards. Over time, with responsible financial management, you can rebuild your credit. Some creditors might offer “secured” credit cards after bankruptcy, which can be a step towards rebuilding your credit.

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