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Can I Keep My Credit Cards?

Understanding Credit Card Retention and New Credit After Bankruptcy

Filing for bankruptcy can be a daunting experience, and one of the most common questions people have is, “Can I keep my credit cards?” Understanding how bankruptcy affects your ability to retain credit cards and when you can apply for new credit is crucial for planning your financial future. Let’s explore this topic in detail, and if you’re in Birmingham, Alabama, the experienced team at Brent W. Davis and Associates, LLC, is here to provide expert legal advice and a free consultation to help you navigate this process.

Credit Cards and Bankruptcy: What to Expect

When you file for bankruptcy, the impact on your credit cards will depend on whether you’re filing for Chapter 7 or Chapter 13 bankruptcy. Here’s what you need to know:

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” involves the discharge of most unsecured debts, including credit card debt. Here’s how it affects your credit cards:

  1. Credit Card Accounts Will Likely Be Closed: When you file for Chapter 7 bankruptcy, most of your credit card accounts will be closed by the credit card companies. This is because bankruptcy discharges your obligation to repay the debt, and creditors typically close accounts when they are no longer able to collect payments.
  2. Secured Credit Cards: If you have a secured credit card (a credit card backed by a cash deposit), it may still be closed, but you might have a better chance of keeping it if the account is in good standing and you reaffirm the debt during the bankruptcy process. However, this is not guaranteed, and you should discuss this with your attorney.
  3. Impact on Credit Score: Filing for Chapter 7 will have a significant impact on your credit score, and the bankruptcy will remain on your credit report for ten years. This can make it challenging to obtain new credit in the immediate aftermath.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, also known as a “wage earner’s plan,” allows individuals with regular income to create a repayment plan to pay off all or part of their debts over three to five years. Here’s how it affects your credit cards:

  1. Credit Card Accounts Will Likely Be Closed: Similar to Chapter 7, most of your credit card accounts will likely be closed when you file for Chapter 13 bankruptcy. Creditors typically close accounts when they are included in the bankruptcy filing.
  2. Repayment Plan: During the Chapter 13 repayment plan, you may be able to keep one or two credit cards for essential expenses, but this is at the discretion of the court and your creditors. Any remaining credit card debt will be included in your repayment plan.
  3. Impact on Credit Score: Filing for Chapter 13 will also impact your credit score, and the bankruptcy will remain on your credit report for seven years. While your credit may be affected, Chapter 13 provides a structured way to repay your debts and can demonstrate financial responsibility to future creditors.

Applying for New Credit After Bankruptcy

Rebuilding your credit after bankruptcy is possible, but it requires time and effort. Here are some steps you can take to apply for new credit and improve your financial standing:

  1. Wait for the Discharge: Before applying for new credit, you must wait until your bankruptcy is discharged. This means that the bankruptcy process is complete, and your debts have been officially eliminated or restructured.
  2. Start with a Secured Credit Card: One of the best ways to rebuild your credit is by applying for a secured credit card. A secured credit card requires a cash deposit as collateral, which serves as your credit limit. Using a secured credit card responsibly and paying off the balance in full each month can help rebuild your credit over time.
  3. Consider a Credit-Builder Loan: Some financial institutions offer credit-builder loans designed to help individuals rebuild their credit. With a credit-builder loan, the borrowed amount is held in a secured savings account until you make all the payments. This demonstrates your ability to manage debt and can improve your credit score.
  4. Pay Bills on Time: Consistently paying your bills on time is one of the most effective ways to rebuild your credit. Set up reminders or automatic payments to ensure you never miss a due date.
  5. Monitor Your Credit Report: Regularly checking your credit report allows you to track your progress and ensure there are no errors. You can obtain a free credit report from each of the three major credit bureaus (Experian, TransUnion, and Equifax) once a year at AnnualCreditReport.com.

Why Seek Legal Advice?

Navigating the complexities of bankruptcy and understanding how it affects your credit cards can be challenging. Seeking the opinion of an experienced bankruptcy attorney is crucial for several reasons:

– Expert Guidance: A knowledgeable attorney can evaluate your financial situation and provide expert advice on the best course of action. They can help you understand the implications of bankruptcy on your credit and guide you through the process.

– Legal Support: Filing for bankruptcy involves a lot of paperwork and legal procedures. An attorney can ensure that all necessary documents are filed correctly and on time, reducing the risk of errors that could delay or jeopardize your case.

– Peace of Mind: Dealing with financial stress can take a toll on your mental and emotional well-being. Having a compassionate attorney by your side can provide much-needed peace of mind and support during this difficult time.

Why Choose Brent W. Davis and Associates LLC?

If you’re in Birmingham, Alabama, and considering bankruptcy, the law firm of Brent W. Davis and Associates LLC is the best choice to help guide you through this process. Here’s why:

– Extensive Experience: With years of experience in bankruptcy law, the team at Brent W. Davis and Associates LLC has the knowledge and skills to provide expert guidance and representation.

– Personalized Approach: They take the time to understand your unique financial situation and develop a strategy tailored to your needs and goals.

– Compassionate Support: Facing financial difficulties can be overwhelming. The attorneys at Brent W. Davis and Associates LLC provide compassionate and understanding support to help you through this challenging time.

– Free Consultation: They offer a free initial consultation, giving you the opportunity to discuss your case with a real lawyer and explore your options without any financial commitment.

Contact Brent W. Davis and Associates LLC Today

Taking control of your financial future and understanding your bankruptcy options starts with a single step. Contact Brent W. Davis and Associates LLC today to schedule your free consultation and learn more about your credit card options during and after bankruptcy. Their experienced team is ready to help you navigate the path to financial stability and peace of mind.

Take the First Step Today

Don’t let medical debt control your future. At Brent W Davis and Associates LLC, we’ve helped thousands of Alabama residents find relief through bankruptcy protection. Our compassionate team understands what you’re going through and knows how to help.

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