Life without a credit card is complex, so it is no surprise that those contemplating bankruptcy often ask us whether they can  “keep a credit card” out of their bankruptcy – in order to have access to emergency funds, for business expense purposes, for frequent flyer miles or other so-called loyalty rewards.

Not so fast

The bankruptcy and credit bureau systems are set up to prevent this strategy. The bankruptcy code provides that all creditors listed in a bankruptcy petition must receive written notice of the bankruptcy filing.  Credit card companies and others who extend consumer credit receive regular reports from the three credit bureaus – and the credit bureaus will pick up the bankruptcy filing and report it to creditors, even those who were “left out” of the filing.

This results in the card being cancelled even though the debtor did not list it.

Credit cards after bankruptcy

Bottom line, there is no way to “keep a credit card out of a bankruptcy.”  It is our clients’ experience that Chapter 7 debtors will receive credit card offers in the mail about six months after the date of filing (not the date of discharge), and Chapter 13 debtors will receive credit card offers about six months after the entry of their discharge (about five and a half years after the date of filing).

Interest rates will be higher due to the bankruptcy, and credit limits may be lower; however, the most significant consideration appears to be the debtor’s income, and what debt it can service.

While it is a myth that debtors can never get credit again, it is true that debtors should not expect to have credit cardsduring their bankruptcy case.