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Credit cardsIf you are considering filing for bankruptcy, then you may have a few questions including, can I keep my credit car open if i file for bankruptcy? The short answer is, yes because the bankruptcy code requires you to list all of your your debts, but the full answer is more complicated.

Your bankruptcy attorney can advise you of all of your options and let you know if the time is right to file your bankruptcy case. The United States Bankruptcy Code requires that all creditors be listed in your bankruptcy filing. This is so that all of your creditors will receive notice of your bankruptcy filing, and stop all collection activity pursuant to the bankruptcy automatic stay. The automatic stay kicks in once your bankruptcy case is filed and prevents creditors from calling you. If the creditors are not listed on your bankruptcy petition, the creditors do not get notice and do not know to stop trying to collect on the debt. The Bankruptcy Code defines “creditor” as “An entity that has a claim against the debtor that arose at the time of or before” the bankruptcy case is filed. Many people are worried that listing their mortgage or car loan means that they will lose their house and car, but this is not true. The overwhelming majority of people who file bankruptcy keep everything they have. Failing to list all of your debts can get you into trouble in your case, and you may risk not receiving a discharge of your debt in your case.

From a creditor’s perspective, bankruptcy is all about the same type of claims being treated in the same way. For example, all general unsecured debt–credit cards, medical bills and most personal loans–receive the same distribution in a bankruptcy case, regardless of who is owed the money. This means that whether it is a medical bill that was unpaid or your own mother, the debts will all be treated the same if a trustee has assets to distribute to creditors in a chapter 7 bankruptcy or in a repayment plan through chapter 13 bankruptcy.  There are a few types of debts that do get priority, such as child support, taxes, criminal restitution or administrative claims to professionals for work completing in your bankruptcy case.

Failing to include all of the required information also is perjury. You sign the schedules under penalties of perjury, stating that you have listed “all entities holding claims”. At the meeting of creditors, you are typically asked, under oath, whether you listed all of your assets and all of your creditors by the bankruptcy trustee assigned to your case. So when your bankruptcy lawyer asks you to list all of your creditors, please make sure that you list all of your creditors! If you fail to list all of your creditors you are only hurting your own case.

The bankruptcy petition also requires you to list any payments of $600 or more to any one creditor within 90 days of your bankruptcy filing.  If you have paid 1 creditor a disproportional amount compared to other creditors a bankruptcy trustee could claw back some of the funds and redistribute the funds equally.  Additionally keep in mind that if you have paid any family or friends or anybody considered a bankruptcy insider within 1 year of filling for bankruptcy, a bankruptcy trustee can seek those funds back from them in order to repay your creditors because you chose to pay back an insider, rather than repay your debts.  If either of these situations sounds familiar, then you may want to wait to file your bankruptcy case to avoid a bankruptcy trustee taking action in your bankruptcy case against you or your creditors or friends and family.

The most common reason somebody wants to retain a credit card when filing for bankruptcy or leave something out of the filing is because they want an extra credit card available in case of emergencies or they like a particular store, such as Nordstrom’s.  While this is understandable, the truth is you can apply for new credit after your bankruptcy case is filed and in a chapter 13 bankruptcy case, you are not allowed to incur new debt while in chapter 13 bankruptcy anyways.  Additionally, you don’t want to fall into the same circumstances that got you into debt in the first place.  Debtors who have filed for bankruptcy should start with secured or prepaid credit cards that will report to the credit bureaus to help build your credit score.  Sometimes, a debtor is able to pay down the credit card to a zero balance prior to the filing of a bankruptcy case and in this case the card would not have to be listed in the bankruptcy as there is no balance owing.  The issuing credit card company may still close out the account, but sometimes you can talk with your credit card company to see if they will allow you to keep the card open, or sometimes the credit card company will agree to reissue the card after the bankruptcy case has been filed.  If you do repay your credit card a significant amount prior to the filing of your bankruptcy case, you may want to think about waiting at least 90 days prior to filing of your bankruptcy case so that this payment does not have to be disclosed on the statement of financial affairs in your bankruptcy case.

If you have additional questions when you can keep  your credit card open if you file bankruptcy contact Symmes Law Group at 206-682-7975 or schedule a bankruptcy consultation online to learn about your bankruptcy options.

  • Richard Symmes

    Hi, Richard here.

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