Can I Keep A Credit Card When I File Bankruptcy?

by Chip Parker, Jacksonville Bankruptcy Attorney

All creditors must be listed in bankruptcy, and any large payments to unsecured creditors in the 90 days prior to the bankruptcy may be considered “preferential,” which means that the trustee can demand repayment of that money from the creditor.  What if you absolutely need to have a credit card?

PROBLEM:  Robert is an independent salesman, and his job requires that he travel throughout the southeastern United States.  As an independent, he doesn’t have a company credit card with which to make necessary purchases while on the road, and it is unsafe for him to carry large amounts of cash.  He really needs a credit card to secure lodging reservations, make necessary repairs to his vehicle and purchase fuel.  Because of his financial circumstances, he is considering filing bankruptcy.

STRATEGY:  If Robert has a credit card with a low balance, he can pay it off prior to filing bankruptcy.  Since a creditor is someone to whom a debtor owes money, if he pays the credit card in full and doesn’t carry a balance from month to month, he does not list the card in his bankruptcy schedules.

CAVEAT:  Just because a no-balance credit card is not listed in the bankruptcy schedules does not guarantee that the credit card company is unaware that Robert has filed.  The bank may cancel the card anyway, but that is uncommon if the balance is zero.

If you are considering filing bankruptcy but want to keep a credit card, ask yourself, “If someone were to sell me this exact same credit card for $ {insert card balance here}, would I buy it?”  You will find that the answer is usually “No,” but that is, in essence, what you would be doing by paying off a credit card you would otherwise be wiping out in bankruptcy.  In the example above, Robert must have the credit card in order to do his job, so he may be willing to pay a much higher balance to keep his credit card than you would.

It isn’t always a bad idea to keep a credit card, as long as you think it through.

See the related BLN article, Do I Have To File On Everything In Bankruptcy?

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