I'm sometimes asked by a bankruptcy client if they can "not file" on or "not include" a particular credit card or other specific debts in their bankruptcy. Here's the deal…

1. You have to include all your debts in the bankruptcy petition and schedules. To fail to do so could result in not getting a bankruptcy discharge on any of your debts.

2. If the amount owed for a debt is less than $600, you are allowed to pay it off prior to the filing of the petition and therefore not list it because there would be no debt. If it's a credit card, the credit card company would probably cancel the account anyway after your bankruptcy. These days, credit card companies are taking a harder line than they used to. Therefore it doesn't make a lot of sense to use your scarce money to pay off that card.

3. After your bankruptcy discharge, you will probably get offers of new (low limit) credit cards. This is a good thing. Get one of those cards and use it to help rebuild your credit. Click here for an article about rebuilding your credit after bankruptcy.

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5 thoughts on “Can I "not file" on a credit card in my bankruptcy?

  • December 10, 2009 at 5:33 am
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    This is a very common question asked by many of my clients. I warn clients that even if they have a zero balance on a card there is a chance that the creditor will discover the bankruptcy and cancel their credit privileges. Rebuilding credit after bankruptcy is crucial. I have found that many of the credit card offers received after filing should be avoided. Debtors should read the fine print carefully. Many of these cards come with low limits and huge fees that virtually consume the majority of the credit limit being offered. If a credit card is absolutely needed post filing, I recommend the debtor get a secured credit card. I also caution them to limit their usage of their credit limit to a maximum of 1/3 of their available limit. Limiting the use of the percentage of available credit will help their credit score rise. Debtor should educate themselves on how their credit score is determined and keep those principles in mind whenever they consider establishing new debt.

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  • December 10, 2009 at 7:33 am
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    Melinda, thanks for your very good advice about rebuilding credit after bankruptcy. I do want to ask you about your preference for a secured credit card over a low-limit non-secured card. Yes, the limits are low on the non-secured cards, there is usually an annual fee of say, $40, the interest on outstanding balances is high and fees and penalties are high if you're late on a payment or go over your limit. But I tell clients that (1) the annual fee is just the price of admission to a credit card after bankruptcy and (2) they should never encounter any of the interest charges or high fees and penalties because they're instructed to always pay the balance in full and early every month.

    Of course if they need a higher credit limit than the maybe $300 limit of a regular credit card, possibly for traveling, then a secured card would be a great thing to get. In fact, I think I'm going to add a portion about secured credit cards to my "Will bankruptcy ruin my credit?" article, thanks to you.

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  • December 10, 2009 at 1:17 pm
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    I've heard the credit card companies subscribe to services that monitor the bankruptcy dockets and report on card holders who have filed. As I understand it, that's why there is no guarantee that a card with a zero balance – even if it's never used and not listed – won't be cancelled.

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  • December 14, 2009 at 10:22 am
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    Paul's right. Every major creditor subscribes to PACER-related data services to scrub accounts, though some will keep $0 balance accounts active post-bankruptcy.

    As for credit after bankruptcy, I'm a firm believer in no plastic. I gave up all of my credit cards in 2001 as a way to test my theory that credit isn't ever needed, and have been proven correct for the past 8 years. I travel with a debit card, and have never had a problem with airlines, hotels or car rentals.

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  • December 14, 2009 at 11:02 am
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    Jay, do you find that the use of a debit card helps to improve a post-bankruptcy credit rating as much as using a credit card judiciously and paying it off quickly?

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