Can I keep my credit card after bankruptcy?

18 Jan Can I keep my credit card after bankruptcy?

Clients frequently file bankruptcy because they have too much credit card debt. Sometimes, a client asks if they can’t keep just one credit card after they file a bankruptcy case. Maybe the client needs to buy gas or small items with it. Maybe she travels and needs to charge her airline tickets or automobile rentals. Maybe he has to advance costs which will be reimbursed on an expense account.

A credit card is a contract between you and the issuer. Under this contract, the issue agrees to extend you credit and you agree to pay. It’s what the Bankruptcy Code calls a “financial accommodation.” So it’s not the kind of contract which you can simply reaffirm, like a car loan or a mortgage. For these contracts, the lender has already lent the money and doesn’t have to lend any more. You just have to pay it back – it’s a “one-way” contract.

However a credit card is a “two-way” contract. The issuer will give you credit and you will pay it back. The lender doesn’t have to extend credit and would be well within its rights to cancel a credit card after you file a bankruptcy case.

A few years ago, credit was looser and issuers were happy to keep you as a customer. Today, it might not be so easy. So I recommend that people obtain and plan to operate using debit cards after they file their bankruptcy case at least until they begin rebuilding their credit.

Lakelaw helps people rebuild their credit after bankruptcy in Illinois and Wisconsin.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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