Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
Filing bankrupty means listing all your debts. Sometimes I hear clients say that they don’t want to “file on” a certain debt. However, you must list all your debts.
In my Summerville bankruptcy practice, I frequently hear clients say that they don’t want to file on a particular credit card. Usually, it’s one with a very small balance that they plan to pay off.
They also think that if they pay off the credit card prior to filing bankruptcy, they’ll be allowed to continue using it after they file their case. The chances of this are slim to none. And paying off a credit card prior to bankruptcy–especially with a large payment–might hurt your bankruptcy case.
Credit card issuers check your credit frequently, and a bankruptcy will almosts always result in the account being closed. While this may be illogical when you have little or no balance due, it’s just the way card issuers do things.
The bigger question is this: Why would you want to keep a credit card? For most folks, a debit card works just fine, and there’s no need to have a credit card. For many people, credit cards are the reason they’re filing bankruptcy.
Let’s face it, card issuers are just plain stupid. They will loan you more than you could ever pay back. I frequently see clients who have far more in credit card debt than they have in annual income, sometimes several times more. Consumers get caught in the trap of using cards, balances build, and pretty soon they’re over their heads in debt.
Credit card issuers are like drug pushers. The sooner you realize that, the better off you’ll be. So when you get your bankruptcy discharge, the last thing you need is a credit card. Use a debit card, or pay with cash or check. Establish a budget.
But I May Need For an Emergency!
True, you may need money for an unexpected expense. And that’s why you need to establish a savings account for those needs. Save a bit each month, and you’ll soon build up a nice sum of money to be used in an emergency.
The Sad Truth
The truth of the matter is that the drug pushers–err, credit card issuers–will be sending you card offers right after you get out of bankruptcy. They know you now have no debt and have more ability to pay than prior to filing bankruptcy. And they now want to help you! (Nice of them, isn’t it?)
Use bankruptcy for its intended purpose: To give you a fresh start. Don’t undo it by trying to keep credit cards open or by getting credit cards right when you get out of bankruptcy.