Bankruptcy Credit Card

by Vincent Polisi on October 28, 2009

If you have filed bankruptcy or are considering it, you may be concerned about getting credit after the bankruptcy.

The reality is that a bankruptcy and the events that lead up to it can cause your credit score to plummet by as much as 300 points.

While this is something that no one wants to experience, the good news is that reestablishing your good credit history is possible.

First, you will need your bankruptcy discharge. This is an order from the court stating that your bankruptcy is over. It is at this point that all of your debts that were included in the bankruptcy are discharged.

Once you have your discharge, one of the first things you will want to do is to get an after bankruptcy credit card. Despite the credit crunch, getting after bankruptcy credit cards is actually a bit easier than it once was.

This is because the bankruptcy law changes in 2005 made it harder for individuals to re-file a bankruptcy once they had a discharge. As an example, if you previously filed a Chapter 7 Bankruptcy, you much now wait at least 4 years to file a Chapter 13. Previous laws had no waiting period. The changing laws lead to many companies being more willing to issue credit cards after bankruptcy.

One important thing to note if you have not filed is that one way to have a post bankruptcy credit card is to reaffirm an account within your bankruptcy. You wouldn’t want to do this for an account with a high balance, but you may consider it on a lower balanced account. If you do this, you will be responsible for the entire balance on the account.

Most creditors want to avoid writing of the credit card balance, so they are happy to allow you to reaffirm your debt. A few creditors will also allow you to keep their credit card if you enter into a new agreement with them after your bankruptcy is discharged. This agreement will generally require that you agree to pay the balance of the credit card off.

Another option to get a credit card after bankruptcy is a secured card. A secured credit card is where you make a deposit with the creditor and they issue you a credit line in that amount. The money you have deposited with the creditor will earn the same amount of interest as if you had the funds in a regular savings account.

As long as the credit card reports to the credit bureau, secured cards will help you build your credit. Additionally, timely payments will be rewarded by an additional credit line without having to make any more deposit.

When shopping for any after bankruptcy credit card, you want to look for a card that does not have an application fee. The reason for this is that you can find yourself with your entire credit limit eaten up in fees. Who wants to make a payment every month simply for the right to have a card that you can’t use?

You should also look for a card that will convert to an unsecured card during a set period of time. Generally, you would want this time period to be less than 24 months.

If a little time has passed since you bankruptcy or you filed bankruptcy prior to your credit being completely destroyed, you may be able to qualify for an unsecured credit card. As mentioned early, you want to shop around and find a card that doesn’t have fees that take up the entire credit line. Also, make sure you understand the fees that surround the credit card. Some companies that offer after bankruptcy credit cards actually charge you a “review fee” to look at you account and determine if you merit a credit limit increase.

One of the most important things you can do when reestablishing credit cards after bankruptcy is to use them wisely! Learning about personal finance is a great idea to make sure you don’t end up right back in the same situation. Check out these personal finance links.

Bankruptcy Credit Card

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