Can I keep my credit card if I file bankruptcy?

Stock answer: no, and I do not advise that you reaffirm a credit card after filing bankruptcy. You’ll get an offer for new credit cards anyway.

What people are usually wondering when asking this question: should I keep a credit card for emergencies and to pay certain bills after a bankruptcy so that I can “keep good credit” with that particular credit card?

You must list all credit cards that you carry a balance with. Failure to do so can be constituted as perjury, which in turn may lead to a denial of your bankruptcy discharge, or federal criminal charges.

You are not required to report ‘zero balance’ creditors on your bankruptcy. However, if you’ve recently made payments to get it down to zero, you can you expect a challenge from the trustee and potentially land in some hot soup. Many credit cards may find out about your bankruptcy and cancel the card anyway, even if your balance is zero.

Most credit card companies will allow you to keep your credit card after bankruptcy if you agree to enter into a new agreement, signed after the bankruptcy filing (called a “reaffirmation agreement.”)

Rebuild your credit without credit cards

It’s actually tougher to rebuild your credit using credit cards, especially ones you reaffirm after filing bankruptcy.

Let’s say that after you file bankruptcy, the credit card approaches you to reaffirm the debt, which is $3,000.00, on the promise that you’ll ‘rebuild’ your credit more quickly. Let’s also say that you will be offered a card with a low-level balance within months of your bankruptcy discharge (very likely.) Why would you pay $3,000.00 for the benefit of having revolving credit when you’ll be offered the same opportunity to ‘rebuild credit’ anyway? In other words, that $3,000.00 is essentially an annual fee for keeping the card.

Keeping your credit card debt actually hurts your credit because it reduces the positive effects that a bankruptcy has on your debt to income ratio: the more debt you keep, the worse your ‘fresh start’ looks via the credit score.

I do not advise using credit cards past bankruptcy. You can rebuild your FICO score using a good financial plan, and by carrying short term loans through a bank that you know you can quickly repay.

Credit Cards No-no’s Prior to Filing Bankruptcy

Never run up lots of credit card debt in the month or two prior to filing for bankruptcy.

Never open up a new credit card.

Never try to pay your ‘favorite’ card off in hopes to keep it.

Never use money from friends or family to pay off your ‘favorite’ card to keep it.

Never sign a reaffirmation agreement for your credit cards.

Think twice before believing that you can ’save your credit’ after a bankruptcy through reaffirmation.

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