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Common questions about bankruptcy and credit card debt

On Behalf of | Mar 16, 2022 | Bankruptcy

Credit card debt can make it challenging for individuals to keep up with living expenses, especially when significant interest rates, fees and multiple monthly payments make it challenging to keep up with existing debts.

Filing bankruptcy often solves many consumer debt issues to get individuals back on a better financial track. When it comes to how bankruptcy affects the fate of credit card debt, there are important things to note regarding debt relief and what happens next.

Does bankruptcy erase credit card debt?

As a rule, bankruptcy will discharge all unsecured debt, including credit card debt. After discharge, the balances on a consumer’s credit report should reflect a zero-sum, and creditors can no longer pursue debtors for payments. However, some credit card companies may challenge these debts if they suspect fraudulent activity or bad faith behavior.

Are credit cards usable after a bankruptcy declaration?

As soon as a consumer makes the decision to declare bankruptcy, it is not permissible to use credit cards. Without intent to pay charges back, creditors can go after debtors for fraudulent conduct, and they are very likely to bear responsibility for debts incurred after establishing intent to declare bankruptcy.

Will bankruptcy prohibit future credit card approval?

Despite the negative report on a consumer’s credit history, bankruptcy declaration itself does not prevent credit card applications from approval. In fact, some credit card companies will encourage applications in order to rebuild credit and will do so shortly after a declaration of bankruptcy considering that debtors cannot refile again for another eight years.

It is possible to apply for credit cards and get approved after bankruptcy, though interest rates or fees may not be desirable and the consumer should weigh his or her overall financial health before applying.