How does bankruptcy affect your credit cards?
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One of the first questions most North Carolina consumers ask when they come in to discuss bankruptcy is what will happen to their credit cards if they file. They also want to know if they can keep their car and other property. On the car and property, North Carolina offers reasonable exemptions to shield your assets; $3500 in equity in a vehicle can be shielded and $35k in your home for an individual filer. However, your credit cards cannot be shielded.
Credit Cards Must Be Surrendered
Whether you file Chapter 7 or Chapter 13, you won’t get to keep your credit cards. When you file Chapter 7, your card issuers will likely close your accounts—that is, if they’re not already closed because you maxed them out and missed payments. With Chapter 13 bankruptcy, you are usually asked to surrender or destroy the cards because you’re not allowed to take on any new debt during your repayment plan without the court’s permission.
Exceptions To Credit Card Policy
In some cases for Chapter 13, you might be able to keep one credit card if you’re required to have one for work to book travel, rent cars, etc. But unless there’s a valid reason that persuades the court that you should be able to keep a credit card, you’ll have to surrender them all. In some states, the courts demand you actually hand the cards to them.
Other Credit Card Exceptions
Bankruptcy requires you to list all of your debts in your bankruptcy petition. If you have a card with a zero balance, then there is no debt to be listed. However, your card issuer's terms and conditions probably state that if you file bankruptcy, they can close your card accounts whether you’re in good standing or not. However, you might also be able to reaffirm your credit card debt and possibly keep an account open in Chapter 7.
Don’t Try To Game The System
One thing you don’t want to do is submit false information to the bankruptcy court. If you’re not honest in all of your communication, forms, and filings with the court, your case can be dismissed or, worse yet, you can face accusations of bankruptcy fraud. All debts must be treated equally. You cannot favor certain creditors by trying to keep them out of the bankruptcy, no matter your intent.
Bankruptcy Is A Financial Reset—Use It Wisely
Even though you might want to keep a credit card in case of emergencies, it’s not a good idea. Bankruptcy gives you a financial reset, and the best way to take advantage of that is to follow all the rules of the court, provide all the information on your debt, credit cards, and other items, and work within the guidelines to get your bankruptcy discharge. From there, you can rebuild your credit slowly and carefully.
Find Out More About Bankruptcy Debt Relief
If you’re living paycheck to paycheck, falling behind on bills, consumed by financial stress, and uncertain what to do next, bankruptcy may be the solution.To learn more about the benefits of bankruptcy, schedule a free North Carolina bankruptcy consultation to discuss your unique circumstances and find out the pros and cons of Chapter 7 vs Chapter 13 bankruptcy.
Contact the Law Offices of John T. Orcutt to find out about the benefits of bankruptcy. Call +1-919-646-2654 now for a free North Carolina bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.