Can I Keep My Favorite Credit Cards Off My Bankruptcy?

By Andy Miofsky, Illinois Bankruptcy Attorney on Apr 4, 2009
No, you are required to include all of your debt, including credit cards, when you file bankruptcy”, says Illinois Bankruptcy Attorney Andy Miofsky.  Some clients ask whether they have to list one or two of their favorite credit cards.  They want to know whether they can keep using those cards after they file.  That does not work and here is why. Each creditor listed on your case receives a notice from the bankruptcy court.  This notice includes a warning, called the automatic not to try and collect a debt from you without permission from the court.  This is an important notice and it protects debtors from collection activity.  Violators can be punished and forced to pay money damages. Credit cards are issued by major banking institutions.  These banks do not want to be sued for violation of the automatic stay.  So these banks monitor bankruptcy filings through electronic internet data services like PACER or AACER, BANKO or MERLIN.  They do not sit back and wait to receive a notice in the mail.  They regularly check all cases to see if any of their card holders are involved. When a bank locates a customer in bankrutpcy, the bank closes that account on its own, even though the bank was not listed in the case.  Hiding a card from the bankruptcy court will not keep the card open.

You Will Have A Life After Bankruptcy 

It is now easier than ever to reestablish credit after bankruptcy. Once your case is discharged, you will receive many solicitations from lenders offering to finance homes, vehicles and credit cards.

The following are some tips to be successful and responsible while you reestablish your credit:

• Open a checking or savings account. Lenders may look at this to determine if you can responsibly handle money.
• Apply for store and gas credit cards that you would normally pay cash.
• Apply for a secured card where you deposit cash and charge against it. Pay advances back over two months so that they will be reflected as positive marks on your credit report.
• Pay your utility bills and rent on time for at least a year.
• Find a friend or relative to cosign for you on a loan and pay it on time.
• Look for car dealers and mortgage brokers that attest to be "bankruptcy friendly". Buy a used car so you do not get hit with the depreciation that occurs during the first two years of a new car purchase.
• Stay away from payday loans that are at high interest rates and are a "bad credit" trap.
• Write a letter to each credit reporting agency explaining the circumstances that lead to you filing.
• Live within your means. Do not unnecessarily increase your debt to income ratio by taking on credit to purchase luxury items that you DO NOT NEED. Your payments on consumer debt should equal no more than 20% of your expendable income after costs for housing and a vehicle.
• Pay your reaffirmed, pre-bankruptcy debts on time.