Oftentimes, those contemplating bankruptcy have maxed out their credit cards or have been recently served by a lender who is tired of waiting for them to pay the full balance that they owe.
For someone just barely able to afford their basic expenses every month, the uncertainty of the bankruptcy process can seem intimidating. Those who understand what will happen with their credit cards after they file may feel more confident about taking control of their finances.
Lenders close cards when people file
The same day that an individual files their bankruptcy paperwork with the courts, they receive an automatic stay. That stay protects them from pending lawsuits and other aggressive collection activity until they resolve the bankruptcy filing. However, it also typically leads to a total freeze of someone’s credit. Typically, credit card lenders will close accounts as soon as someone files for bankruptcy, which means that they can no longer use their revolving lines of credit for any purpose.
Of course, when the bankruptcy process is successful, it will end with the discharge of the remaining balance on someone’s credit cards, thereby eliminating the obligation to repay what they owe. For many people, that discharge makes the inconvenience of losing their revolving lines of credit worthwhile.
New cards will be available eventually
Most people who successfully complete bankruptcy will start getting offers for credit cards again within a few months. Lenders often offer secured cards that require a deposit and charge a higher interest rate at first, but people who make use of those early offers and establish a positive payment history after their discharge will often be able to qualify for larger credit cards with better terms after a few years.
For many people, filing for bankruptcy is the best possible solution for high levels of personal debt, but there will also be challenges resulting from the loss of their revolving lines of credit. Discussing one’s finances with the team at the Quinn Law Firm by calling 814-833-2222 can help someone better time when they file to minimize the disruptions that it will cause in their lives and also maximize the benefits that they derive from the bankruptcy process.