You Cannot Keep A Credit Card With A Balance When The Bankruptcy Is Filed
If there is a balance on a credit card when the bankruptcy is filed, it must be listed in the bankruptcy. The reason for this is that all debts must be listed in the bankruptcy. Intentional failure to list a debt in the bankruptcy is considered fraud, and may result in very serious consequences, including denial of discharge and even criminal penalties. Furthermore, the purpose of bankruptcy is to eliminate debt, and in almost all cases all credit card debt will be eliminated in bankruptcy, so it is to your benefit to list all credit card debt in bankruptcy.
Practically all banks and credit unions will cancel a credit card that is included in a bankruptcy.
What Happens To Company Credit Cards
If your employer issued you a credit card to pay for travel and other expenses, you might be concerned about including it in your bankruptcy. Youll only have to list the card if youre liable to the lender for the balance.
Company credit cards come in three varieties based on whos liable on the account:
- The monthly statement goes directly to the employer, and the employer is responsible for paying the bill.
- The monthly statement goes to the employee, who is liable for payment of the account, then seeks reimbursement from the employer.
- A combination of the two. The statement usually goes directly to the employer, but employees reimburse the company for any personal expenses.
When you file for bankruptcy, you must list the card if you have any personal liability on it. If your company shoulders that entire burden, and you have no responsibility for the account, you shouldn’t list the card.
If youre not sure whether youre responsible for payment, your human resources department should be able to clear that up.
But this may clue you in: if your employer did nothing more than hand you a card and tell you what you could purchase with it, its probably a company-issued card that carries no individual liability.
Lets Take A Look At A Few Of Those Mistakes:
Failing to fully understand the credit card terms. Many post-bankruptcy debtors are so excited to receive credit card offers after their bankruptcy that they end up skimming over the terms of the credit card. This can result in signing up for credit cards which are stuffed with many fees and high interest rates.Placing irresponsible authorized users on their credit card account. Many post-bankruptcy debtors make the mistake of trying to help out friends and family by placing them on their credit card accounts as authorized users only to be left with a large bill after those people fail to pay.
Co-signing credit card accounts or other loans for friends and family with credit issues. Post-bankruptcy debtors must remember that if they are not paying their own bills their friends and family members are even less likely to pay a bill which was co-signed.
Failing to communicate with creditors early and often when they run into financial problems. Post-bankruptcy debtors are not immune to financial issues after their bankruptcy discharge. But when those issues do come up, they must make sure they communicate clearly and early with creditors.
Failing to get any creditor agreements in writing. As we mentioned in point #4, sometimes there are financial issues which require us to work something out with creditors. But post-bankruptcy debtors need to make sure that they get all agreements in writing.
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Howard Dvorkin Cpa Answers
More so than any other financial topic, bankruptcy is both complicated and depressing. Think about it: Mortgages are also complex, but after you navigate the process, you own a house!
Bankruptcy, however, is simply a fresh start, says the federal government. Unfortunately, the governments explanation of the process isnt exactly user-friendly its called Bankruptcy Basics, but it looks like this. Not very basic, is it?
So here are three crucial things to know, Vanessa
You Should Not Pay Off Credit Cards Before Filing For Bankruptcy
The fact that a bank may allow you to keep a credit card without a balance does not mean that you should pay off a credit card before filing for bankruptcy. In fact, doing so will be counter-productive. In Chapter 7 bankruptcy, the bankruptcy trustee can undo any payments you made within 90 days before bankruptcy that are considered a preference. A payment is considered a preference if it is made for an old debt, or for a debt that had been due before the payment was made. Generally, a credit card payment will be considered a preference unless the charges being paid were incurred within the prior month. So, if you pay off a credit card shortly before filing for bankruptcy, the trustee will get that money from the bank, which means that there will still be a balance owed on the credit card. On top of that, you will have lost the money that you used to pay off the credit card. In short, paying off a credit card before filing bankruptcy is almost always a bad option.
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Avoiding Trouble With Credit Card Debt In Bankruptcy
Ensuring that as much of your credit card debt can be discharged is all about timing. If your credit card was used for unnecessary expenses within 90 days of your filing date, theres a chance that balances will not get discharged.
There is also a possibility that you could get in trouble for fraudulent activity if you run up balances just before you file. Credit card companies can make a case to the bankruptcy court that your debt was fraudulent if you made luxury purchases of $600 or more in the 90 days before you filed. Such luxury goods can include things like:
- unnecessary upgrades to your house
- expensive cars
- indulgent spa treatments
However, if you use your credit card for necessary expenses that you simply cannot afford on your income, the debt will be discharged. Examples include essential car or house repairs, gas, medical bills, groceries and other things you or your dependents need to survive.
The best course of action is to talk to a local bankruptcy attorney that is licensed in your state. They typically offer free consultations and can help you come up with the best timeline to file.
Talking To Your Employer
If you have to list that company credit card, you need to talk with your employer before filing for bankruptcy. This isn’t something you want your accounting or HR employees or your boss to find out when they get a notice from the lender or from the bankruptcy court.
The thought of having to sit down with an employer and admit that youre going to declare bankruptcy can be intimidating. Keep in mind that it’s illegal to discriminate against a person for filing a bankruptcy case.
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Can I File A Chapter 7 Bankruptcy Case Without An Attorney
Bankruptcy attorneys help individuals who need debt relief file a bankruptcy case. However, the average attorney fee for a Chapter 7 bankruptcy lawyer can be $1,200 to $1,500. In addition to the attorney fee, you must also pay the filing fee to the bankruptcy court and the fees for your required bankruptcy courses.
If you can afford to hire a bankruptcy attorney, it is usually best to do so. Bankruptcy law can be confusing when you are trying to file a Chapter 7 case without an attorney.
You can file a bankruptcy case without an attorney and although itâs great to have an attorney, itâs not always necessary. If you canât afford to hire a lawyer, check if you’re eligible to use Upsolve’s free web app to prepare your bankruptcy forms
Get Help Filing A Chapter 7 Case Without Paying An Attorney Fee
Although it can seem complicated, many people who file for Chapter 7 have a pretty straightforward cases. In these easier cases, it usually makes sense to file on your own but just get help with the paperwork.
Donât know where to start? A nonprofit like âUpsolveâ might be all you need. This free legal aid nonprofit can help you do your own paperwork and give you guidance on what to expect throughout the process.
Donât forget â Upsolve is free! The only costs you have to cover are the ones required by the court. Take their screener here to see if you qualify for their assistance!
Our unique bankruptcy software walks you through the process of filing a Chapter 7 case step-by-step. You can confidently complete your bankruptcy forms, file the forms with the bankruptcy court, and attend your bankruptcy hearing without an attorney.
In most cases, debtors receive their bankruptcy discharge within four to six months after filing their Chapter 7 bankruptcy petition.
You are required to pay the filing fee to the bankruptcy court and pay the fee for your bankruptcy courses. The filing fee is a standard fee, but you can typically locate a company that provides the bankruptcy courses online for $10 to $15 per course .
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Under bankruptcy law, individuals or entities can file for bankruptcy in order to obtain protection from creditors and wipe out debt. Most of your creditors will close your accounts as a resultespecially if you are bankrupting the debt you owed to them. It may be possible, however, to keep a credit card after your case is filed and/or discharged. Whether or not you may do this depends on what the credit card company is willing to do and on whether you have any money to put towards your debt.
When Can You Keep a Card?
Before reaffirming any debt, you need to consult with a bankruptcy lawyer to learn more about bankruptcy law and to find out if reaffirming debt is in your best interests.
You May Make Surplus Income Payments
When you file for bankruptcy, you must do the following:
- disclose to the LIT information about all of your assets and liabilities
- advise the LIT of any property that was sold or transferred in the past few years
- surrender all your credit cards to the LIT
- attend the first meeting of creditors
- attend two counselling sessions
- advise the LIT in writing of any address changes
- if required, attend an examination at the Office of the Superintendent of Bankruptcy and
- assist the LIT as needed in administering your estate.
You may be required to make additional payments to your LIT for distribution to your creditors.
In addition to paying the LIT’s fees, you may be required to make additional payments to your LIT for distribution to your creditors. These are called surplus income payments.
Each month during the bankruptcy process, you must submit a copy of your pay stubs and proof of other income to the LIT. The LIT then calculates your surplus income.
Surplus income is the part of your earnings that exceeds the amount of income a family needs to maintain a reasonable standard of living. This amount is set by the OSB annually. The larger your family, the more you are allowed to keep the more you earn, the more you are required to contribute.
In other words, if your household income exceeds the level set by the OSB, then you must make additional payments to your LIT during your bankruptcy.
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Can You Keep Your Credit Cards After Bankruptcy
If you have a zero balance credit card that was not listed in your bankruptcy, the court will not send your lender notice of your bankruptcy. But even if a credit card company was not listed in your bankruptcy, it will typically still learn of it through other sources . In that case, it may still decide to cancel your credit card.
You may also be able to keep a credit card by reaffirming it after your bankruptcy case is filed. By reaffirming, you are signing a new contract with the credit card company that makes you personally liable on the debt again . Since most debtors file for bankruptcy to wipe out their credit card debt in the first place, it is normally not a good idea to reaffirm a credit card absent an extremely compelling reason.
Many people can get a new credit card after bankruptcy. Learn more in Getting a Credit Card After Bankruptcy.
Should You Get A Credit Card After Bankruptcy
Getting a credit card after bankruptcy can be a smart move, provided you can manage it responsibly. The bankruptcy will have damaged your credit score, and making on-time credit card payments is one of the best ways to rebuild your creditworthiness. Before filling out a credit card application after your bankruptcy, though, consider the reasons you got into financial trouble in the first place and if getting more credit is a move you can handle at the moment.
Perhaps your bankruptcy was the result of an unforeseen and unlucky event, such as a medical emergency, divorce, job loss or natural disaster, rather than bad money management. In that case, youre more likely to be ready for the financial responsibility of having a credit card again and for beginning the long road to rebuilding your credit. Just make sure to shore up other areas of your financial well-beingsuch as a stable job and an emergency fundso you can be prepared for any unexpected challenges you may face in the future.
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How Much Property Do You Own
In both Chapter 7 and Chapter 13 bankruptcy, a debtor can protect or “exempt” property using bankruptcy exemptions. Bankruptcy exemptions vary from state to state. What happens to “nonexempt” property that isn’t protected will depend on the bankruptcy chapter you file. So you’ll want to review your state’s exemption laws and consider the bankruptcy chapter.
Here’s how it works.
In Chapter 7 bankruptcy, the bankruptcy trustee will sell your nonexempt assets and use the funds to pay back your creditors. If you own a lot of property that you can’t protect with a bankruptcy exemption, filing for Chapter 7 bankruptcy might not be in your best interest.
By contrast, if you file for Chapter 13 bankruptcy, you can keep all of your property. But you’ll have to pay your unsecured creditors an amount equal to the value of your nonexempt assets. The good news is that you don’t have to pay it all at once. You’ll pay it over three to five years, depending on the length of your repayment plan.
Student Loan Hardship Options
If youre struggling with student loan debt, know that bankruptcy wont discharge that debt. However, there are options to make your payments more manageable.
Borrowers with federal student loans can choose to pursue deferment or forbearance for up to three years total. Depending on the type of student loans you have and the type of relief you choose, interest may still accrue during this time. Through Sept. 30, 2021, all federally owned student loans are automatically under forbearance with no interest accrual.
Another option for federal borrowers is to switch to an income-driven repayment plan with a loan forgiveness option. This will extend your repayment timeline, but because the plan bases your student loan payments on your actual income, your monthly payment may be as low as $0.
If you have private student loans, you may still be eligible for deferment or forbearance options. This depends on the lender if youre facing financial hardship, call your lender and ask about your options.
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Signs That Your Credit Cards Are Pointing You Towards Bankruptcy: