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bankruptcy credit card debt

How to Get a Post Bankruptcy Credit Cards

by Wendy Black Polisi on October 29, 2009

Many people ask me how they can get credit cards after bankruptcy. As it relates to credit restoration, one of the most important things that you can do after a bankruptcy is to begin establishing new credit immediately. There are many commonly held misconceptions that it is impossible to immediately obtain credit cards after bankruptcy. After all, you probably just included a bunch of credit cards in your bankruptcy, right? Why would a lender or bank want to issue you a credit card after bankruptcy and let you immediately rack up post bankruptcy credit card debt? Doesn’t make sense, does it?

The truth is, they are highly motivated profiteers who understand your situation better than you do. They understand that you cannot file bankruptcy again for at least 10 years and therefore cannot include their new card as bankruptcy credit card debt. So, their risk is highly minimized since you cannot write them off. Additionally, if you filed a Chapter 7 Bankruptcy and didn’t reaffirm any of your prior debts, you now don’t owe anybody any money. This increases your liquidity and cash flow providing you with a greater ability to make timely payments on your shiny new post bankruptcy credit card. Oh, yeah, and here’s the sick thing, they already know you are a credit card junkie by looking at your credit report. They can see all of the bankruptcy credit card debt that you wrote off, what the balances were, what the payments were and how long you paid on time.

Now, before I share with you the various methods to get a post bankruptcy credit cards, allow me to remind you of your new mantra: “Debt is dumb!”

The truth is that credit cards are for the financially uneducated. I know painfully, I used to be one of them. Credit cards, and especially post bankruptcy credit cards, offer a sweet seduction back into economic bondage and slavery. Before you get a credit card after bankruptcy, be sure that you have analyzed the causes that led to your bankruptcy so you don’t make the mistakes of the past. Without this reflection, history has a way of repeating itself and I don’t want to be responsible for showing you how to get post bankruptcy credit cards so you can immediately rack up post bankruptcy credit card debt and start the cycle all over again that led you to bankruptcy to begin with.

Unfortunately, the truth is that our current economic society is heavily based on credit ratings and the extension of credit. Getting a credit card after bankruptcy has a way of making you feel like you are rejoining the ranks of an upper class elite society. The key to post bankruptcy credit cards is not going into post bankruptcy credit card debt for any reason. Obtaining credit cards after bankruptcy has to be done for the sole purpose of restoring credit, not going back into debt.
In other words, if you don’t have the cash to pay for it, you cannot afford and you don’t need it. You don’t put it on a credit card and pay 29.9% compound interest which is akin to paying upwards of 3 times the amount of the item you are financing. You want to use the cards and pay them off monthly. Otherwise, you will ultimately fall victim to Parkinson’s Law once again. As it relates to obtaining credit cards after bankruptcy, Parkinson’s Law states that expenses ALWAYS rise to meet income. In other words, without proper management, credit cards after bankruptcy will always lead to revolving, compound interest, post bankruptcy credit card debt that will rise to meet your income and eventually leave you with no liquidity or reserves as you work solely for the purpose of paying off post bankruptcy credit card interest. Not too smart.

So, with that in mind, here are a few methods by which to obtain both unsecured and secured credit cards after bankruptcy:

Obviously, unsecured credit cards are better from a credit perspective because the credit account or trade line on the credit bureau doesn’t reflect that the card is “secured”. When obtaining credit cards after bankruptcy, ideally you want as many unsecured cards as you can get. Depending on the damage to your credit report, getting unsecured credit cards after bankruptcy can actually be very easy or it can be an uphill battle. The easiest way to get unsecured credit cards after bankruptcy is as follows:

1. Apply to credit card companies that specialize in credit cards designed for less than perfect credit like Orchard Bank, First Premier and Capital One.
2. Apply at your credit union if you belong to one
3. Get a family member with excellent credit to add you as an authorized signor on one of their credit card accounts

If you cannot obtain unsecured credit cards after bankruptcy, the obvious next step is to obtain secured credit cards. With a secured credit card, you front the amount of the extended line of credit in cash. It is like a forced savings account and the bank or credit card lender has no risk because they are simply lending you your own money at high compound interest rates. It is kind of stupid when you think about it, but if you want to get credit cards after bankruptcy to begin restoring your credit, you may have to go this route. There are literally hundreds if not thousands of credit card companies that will provide you with a credit card after bankruptcy. The key here is to compare the different offers and then use the round robin method so you can maximize the number of credit cards after bankruptcy that you can get.

What’s the round robin method?

When trying to get post bankruptcy credit cards or credit in general, you want to get as many accounts as you possibly can in the shortest possible time frame so you can have numerous trade lines reporting and so you can maximize the seasoning on each line. Seasoning is the length of time the account has been opening and you want as many timely payments reporting as possible. When you go to get unsecured credit cards after bankruptcy, you will be limited to the amount of available liquid capital that you can initially send to the credit card company for the secured credit card. So, what you do to maximize the number of cards you can get is to analyze all of the credit card offers to determine their cash out limits.

Ideally, you want the cards with the highest cash out limit and the lowest annual percentage rate (A.P.R.). Then, take your available funds and get the first card. When the card arrives, go max out the cash out limit and apply for card number two. Repeat the cycle until you have at least 5 cards. The key here is to understand that in so doing, you are going to artificially create after bankruptcy credit card debt, which, as previously mentioned, you do not want from either a financial planning perspective or a credit restoration perspective. Be sure that you do not unwittingly overload yourself with interest payments while obtaining the cards.

The key is to pay each of the cards off in the shortest possible time frame so you can minimize interest payments and maximize your savings since the principal payments you are making are actually forced savings account payments. After a period of time, your credit will recover to the point that you can start getting totally unsecured credit cards after bankruptcy. Then, you will slowly phase out all of the secured cards because of the fees and high interest rates that they come with, not to mention, the way they report on your credit report as “secured”.

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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.

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