Many individuals who are planning on filing for bankruptcy wonder what will happen to their credit cards when they actually file. The answer to this question depends on the status of the credit card that you have at the time of filing. Typically, credit cards fall into one of three categories including cards that have a zero balance, cards that have a balance, but payments are current, and cards that have a balance that are in default.
Cards that have a zero Balance:
When listing creditors on your bankruptcy petition, you must list all of your creditors, meaning people that you owe money to. Unfortunately, you are not able to exclude some creditors while listing others. However, if you have a credit card with a zero balance, meaning you do not owe them any money, you do NOT have to list them on your bankruptcy petition. Because you do not have to list these creditors, this means that you may be able to come out of your chapter 7 or chapter 13 bankruptcy with the credit card. There are exceptions to this depending on the creditor, though. Some, if they find out about the bankruptcy, may cancel the card upon discovering that you filed for bankruptcy. Many credit card companies constantly monitor their customer’s credit reports. They could also cancel the card, even if it has a zero balance, due to the risk they feel they may take by allowing the card to be open. Many credit card companies allow you to keep your credit card open after filing for bankruptcy if it had a zero balance at the time of filing.
Cards that have a balance, but current payment history:
If you owe a credit card money, even if you are not behind on payments, the company will usually close the account you have with them, and any additional accounts. If you wish to keep the card, you can contact the company to learn what their policy is regarding bankruptcy; however, without any sort of written agreement to repay what you owe the creditor, they will most likely close your account. Additionally, it is generally not recommended that you agree to pay unsecured debts (such as a credit card) post filing for bankruptcy. The point of filing for bankruptcy is to get a fresh start post filing, and agreeing to take on old debt afterwards is not to your benefit.
Cards that have a balance and do not have a current payment history:
If you owe a creditor money are not current with your monthly payments to them, when you file for bankruptcy they will close your account. If you also happen to bank with the same company, they can freeze or close your bank account as well. If the company freezes your account at the time of filing, they can access the funds in your account to offset the amount you owe them, so it is very important to inform your attorney about these sorts of situations prior to filing for bankruptcy.