What Happens to my Credit Cards when I File Bankruptcy?

The quick answer is that it depends. It depends on the status of your accounts. Your credit cards likely fall into one of these three categories:

Cards on which you have a zero balance

  • On the bankruptcy petition and schedules you must list all of your creditors, meaning people that you owe money to. However, if you have a zero balance then you do not owe them and they therefore do not have to be listed on the petition. This means you MAY come out of the Chapter 7 or Chapter 13 with the credit card. However, there are exceptions.
    • Trustee may take your credit cards
    • The credit card issuer may find out about the bankruptcy – many creditors constantly monitor their customers credit reports for signs on economic weakness
    • The credit card issuer may cancel your zero-balance card – If they learn of the bankruptcy, the company may termite your account based on credit risk. However, some companies are happy to continue doing business with you because now you will not be able to file another Chapter 7 for eight years.

Cards on which you have a balance but you are current on payments

  • If you owe a creditor money even if you are not in default, the credit usually as a matter of course will close the account and any of accounts that you have with them. If you happen to bank with the same company, they can freeze or close your bank accounts as well.
  • If you file a Chapter 7 and want to keep the card you can contact the credit card issuer. However, absent an agreement to repay, they are likely going to close the account. In addition, it is typically not recommended that you agree to pay debts for unsecured things such as a credit card. The purpose of the bankruptcy is a fresh start and therefore you should come out of it with no unsecured debt.

Cards on which you have a balance and are in default

  • If you owe a creditor money and are in default, the credit usually as a matter of course will close the account and any of accounts that you have with them. If you happen to bank with the same company, they can freeze or close your bank accounts as well. This can have devastating results if for example your paycheck was just deposited into the account, etc. so contact an attorney prior to filing bankruptcy.