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Why Credit Card Companies Are Eager To Lend To Chapter 7 Bankruptcy Debtors
It seems counterintuitive that a bank or lender would be willing, much less eager, to give credit to someone who just caused their competitors to lose hundreds or thousands of dollars. But, these are the sound and rational reasons for it:
- You as a debtor just discharged thousands of dollars in debt, which frees up resources that can be used to pay back a new credit card balance.
- You cannot file another bankruptcy for some time. For instance, if you received a discharge in a Chapter 7 case, you cant receive another Chapter 7 discharge for eight years.
- The creditor can charge you a higher interest rate.
How Did We Choose These Cards
When shopping for the best unsecured credit card, there are several factors to consider. These are some of the ones we considered in our search for the best unsecured credit cards.
- How much you pay in interest can have an enormous bearing on your financial state, especially since unsecured credit cards may have higher interest rates than .
- Card requirements. Some credit card companies may require that you furnish other details to provide a financial overview without the need for a credit score.
- Rewards. Many credit card issuers offer perks for credit cards, such as cashback, points, or miles that can all be redeemed with different programs and partners.
- Introductory offer. credit cards may also come with an introductory offer, such as one that skips the purchase or balance transfer APR for a certain period.
- Automatic review: Most credit card companies will complete an automatic review to assess your spending and payment history. If you show a history of responsible payments, you could receive a lower rate for your credit card.
Take the time to seriously consider your needs before shopping and comparing your options for the best unsecured credit card for you.
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Tips To Choose Best Credit Cards After Chapter 7 Bankruptcy
Here are some tips to choose the best credit card to apply for after chapter 7 bankruptcy:
- Make sure the card issuer reports your account details to each of the three major credit bureausExperian, TransUnion, and Equifaxwhich will give you a greater chance to raise all of your credit scores.
- Ideally, after a predetermined amount of time, your secured credit card will “convert” to an unsecured one. If you have paid your debt in full before it converts, you will receive your deposit back. You can continue to use the card to aid in establishing your credit history.
- You can receive alerts for significant changes to your credit report by registering for free, round-the-clock credit monitoring. This can let you respond swiftly to mistakes and fraud warning indicators. You can tell whether you’re prepared to apply for a credit card upgrade by keeping an eye on your credit score.
You should check your credit reports for inaccuracies and keep an eye on your credit score going forward in addition to following tips mentioned above. Choose the best credit cards to rebuild credit after chapter 7, Zolve Credit Builder Card can help you to start the process of rebuilding your credit. You certainly don’t want the issues that resulted in bankruptcy to come up again.
Can Credit Card Companies Sue Me After I File For Bankruptcy
When you file for bankruptcy, the automatic stay protection goes into effect and prevents credit card companies from initiating or continuing a suit against you to collect money.
If the credit card company filed a debt collection lawsuit against you before you filed, and the case hasnt been settled the lawsuit cant proceed while the automatic stay is in effect, unless the bankruptcy court gives the card company permission.
If you do receive a discharge in Chapter 7, most often that will include discharge of judgments from debt collection lawsuits.
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What Is The Easiest Credit Card To Get With Bad Credit
The easiest card for a subprime borrower will be either a secured credit card or an unsecured card marketed to those with bad credit. If you have the money on hand for a secured cards deposit collateral, this will likely be the easiest, safest-for-your-credit and most straightforward option.
Theres a relatively low bar for approval with secured cards and the collateral mitigates risk for the issuer, meaning you can even find secured cards with rewards. If coming up with the money upfront is unachievable, reconsider getting a card if at all possible, an unsecured card designed for subprime lenders will be the most accessible option.
Can You File Bankruptcy On Credit Cards Only
According to the CNBC, 43 percent of card holders carry a balance each month, and the Federal Reserve reports that outstanding card debt hit a record $1.023 trillion in November 2017. Rising credit card debt is a leading reason why Americans get into a financial hole and wind up being threatened with foreclosure on their homes.
If you have reached the point where your credit card and other debt have become overwhelming, filing for bankruptcy may be your best option. Bankruptcy, a legal way to have many debts forgiven, can eliminate credit card and other unsecured debt, and may still allow you to keep your home.
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Treatment Under Means Testing
At first glance, it might appear that under means testing as currently proposed, filings similar to these outliers would either be found abusive or converted to chapter 13. We believe that this would be the outcome in only a small portion of the cases and that most would be allowed to remain in chapter 7. Many involve debts arising from the operation of a business, so the means-testing provisions would not be applicable. Other debtors would be able to demonstrate an inability to fund a chapter 13 plan. Of the remaining cases, some would exceed the chapter 13 debt limits so they would not be candidates for conversion .
Best Secured Credit Cards For Post
If you dont qualify for an unsecured credit card or prefer setting your own credit limit through a deposit, secured credit cards are a great option. Because the card is secured by your deposit, there is less risk to the issuer should you become unable to repay your balance. As a result, secured credit cards tend to have very flexible credit requirements, meaning almost anyone can qualify for a secured card.
One of the reasons secured credit cards can be preferable to unsecured cards is the ability to obtain a much higher credit limit. Unsecured cards for poor credit tend to cap limits in the low hundreds of dollars, while some secured cards offer the ability to obtain a credit limit as high as $5,000 so long as you can make a deposit of that amount.
A high credit limit can be very helpful for your credit score, especially if you tend to make large or frequent purchases. Thats because your utilization rate, or the ratio of available credit to debt, can be worth up to 30% of your FICO credit score. A higher credit limit can help you maintain a lower utilization rate, which is better for your credit score.
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Whats Next For Blockfi Customers
BlockFi filing for bankruptcy protection has been widely anticipated after FTXs demise. The troubled platform suspended withdrawals in the wake of FTXs collapse earlier this month.
The halting of withdrawals was a similar move pulled by fellow bankrupt lenders, most notably Celsius and Voyager Digital, before they filed for bankruptcy protection.
Now, much like customers of those platforms, BlockFi customers have had their fate taken largely out of hand, and the legal proceedings will likely take years to play out.
Not that anyone would do so, but BlockFi has advised customers not to deposit any more funds.
In a note to clients, BlockFi said: We encourage clients to maintain their BlockFi app and account at this time. At this time, withdrawals from BlockFi continue to be paused. We also continue to ask clients not to submit any deposits to BlockFi Wallet or interest accounts.
BlockFi says it has $256.9 million of cash to hand, which is sufficient to finance the costs of the bankruptcy case so that the firm can avoid debtor-in-possession financing.
But the biggest factor for most customers is that withdrawals remain suspended. Unfortunately, thats something that wont change anytime soon.
What To Do Before Obtaining A Credit Card
After your bankruptcy discharge, you should get a copy of your credit report from Experian, Equifax, and TransUnion. Then, thoroughly review each of these reports and look for incorrect information like discharged debts that may have not been removed or accounts that are not yours.
Once youve established that your credit report looks okay, you should research the various secured credit cards available to you and select the one that does not have an application fee and charges a reasonable annual fee. Additionally, make sure the credit card company will report to Equifax, Experian, and TransUnion. If it fails to do so, you wont be able to improve your credit rating by using your card responsibly.
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How Long Does Filing A Bankruptcy For Unsecured Debt Take
We have previously written about the time frame for a Chapter 7 from start to finish, and you can read that post: How Long Does Bankruptcy Take? Generally, our firm is ready to file when you are. For most clients, the ability to pay for the bankruptcy is what poses a delay in filing. Supposing you are ready to file bankruptcy and ready to pay for your bankruptcy, our firm can typically prepare your bankruptcy within two weeks.
Filing Bankruptcy On Credit Cards Only
Filing bankruptcy just to eliminate credit card debt is not practical for one reason: You must include all debts when you file bankruptcy. Thats true whether youre filing Chapter 7 or Chapter 13.
So, if you had no other debts, there are better options for paying off , like debt management or debt settlement programs, that wouldnt be as drastic or have as much negative impact as bankruptcy.
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Chime Credit Builder Card
Youâll need a Chime checking account with direct deposit enabled to be eligible for the Chime Credit Builder card. You only need one qualifying direct deposit of more than $200 to qualify for the Chime Credit Builder card. Thereâs no minimum deposit. Your credit limit is equal to the amount you deposit into your credit-builder account.
Best Unsecured Cards After A Discharged Bankruptcy
All of the cards below are an acceptable choice for folks who once experienced bankruptcy and now seek a new credit card. All offer modest credit limits but differ in the fees they charge.
Pay close attention to one-time and recurring fees as well as the interest rate and other APRs. Unless you see a unique feature that you need, we recommend you choose the card that costs the least to get and to own.
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The Surge Mastercard® invites consumers with previous credit problems to apply. You can prequalify by submitting information about your checking account, monthly income, and whether you foresee taking cash advances. Youll also have to supply your Social Security number.
Fees are about average for this type of card and consist of an annual fee and fees for cash advances, foreign transactions, and additional cards. A monthly maintenance fee is waived during the first year. You can get a higher credit limit by paying your bill on time for the first six months. The card provides $0 fraud liability.
The Fingerhut Credit Account lets you charge purchases when you shop at the Fingerhut online store or at one of its affiliates. This card charges no annual fee and will occasionally offer special repayment terms.
As with most store cards, this one is easy to obtain. If you dont qualify, you may be offered Fingerhuts Fresh Start Installment Loan. Once repaid, Fingerhut may then offer you the credit account.
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Should I Get A Credit Card After Bankruptcy
After filing a bankruptcy or consumer proposal, most people believe they need a credit card. Getting a new credit card can be beneficial:
- Building credit after bankruptcy requires obtaining new credit and re-establishing a good payment history. A credit card is the best type of credit to begin your credit rebuilding.
- You may need a credit card for online payments, to rent a car or book a hotel room, instances where you cant use debit cards or transfer money from your bank account.
- A credit card might make keeping track of your spending easier than using cash.
- And of course, there are the standard credit card benefits like purchase protection and earning rewards or points.
How To Get A Secured Credit Card With Bad Credit
A secured credit card is typically easier to get for those with bad credit than an unsecured credit card with decent terms. Each is different and comes with its own minimum and maximum credit limits, typically requiring a minimum opening deposit between a few hundred and a few thousand dollars. .
Secured cards are offered by nearly all major issuing banks and some smaller ones. If you know already what bank or other lender youre interested in using, secured cards are most easily pursued through the issuers website. We recommend comparing at least several different options online and checking out other trusted resources for recommendations or general advice, such as our guide to the best secured credit cards.
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Why Would I Be Turned Down For An Unsecured Credit Card
When you apply for a credit card, your issuer considers two fundamental factors: your income and your credit rating. Even if you have a steady job and good incomeand even if you’ve paid down your previous debts in fullyour credit rating may tell a completely different story. With a low rating and bankruptcy on your record, you will be considered a high-risk customer.
Can You Declare Bankruptcy On Credit Cards Only
While credit card debt is a major reason people wind up filing for bankruptcy, you cannot file for bankruptcy on credit card debt alone, as the law requires that all your debts be listed in the bankruptcy documents. However, because bankruptcy can eliminate credit card and other unsecured debts, filing will often put you in a better financial position that allows you to keep your home.
Keeping a house is a major concern for most people filing for bankruptcy in Ohio, and there are several ways that bankruptcy can allow you to keep your house while discharging unsecured debt such as from credit cards. You will be able to keep your home if you can meet the requirements of the bankruptcy chapter that you choose, whether Chapter 7 or Chapter 13.
Bankruptcy laws are complicated, and our Ohio bankruptcy lawyer can help you choose the correct chapter and increase the chances of your being able to keep your home, car, and other assets. The skilled and compassionate Ohio debt relief attorneys at Fesenmyer Cousino Weinzimmer understand that even the most well-intentioned people can find themselves in financial difficulty.
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Can You Do A Balance Transfer With Bad Credit
If you have subprime credit, it can be challenging to qualify for a card with a 0% APR balance transfer offer or a lower interest rate than your current card. Typically, these types of cards are available to those with good or better credit. Balance transfers from another bank are a way for credit card issuers to take on new customers, but first the lender will evaluate the perceived level of risk in extending credit. If your credit score deems you too risky to an issuer, your balance transfer wont be approved.
If youre looking for help taming a high-interest credit card balance and your credit doesnt qualify you to transfer your balance to another card, consider a personal loan, which may have more favorable rates. You can also speak to a credit counselor who might be able to help you work through your options for improving credit and paying down your debt.
Once You Receive Your New Card
After you receive your new card, pay it off in full each month, if possible, or at the very least, make the minimum payment. This gets reported to the credit bureau and will help establish a positive credit report that will begin to increase your overall credit score. If you are late with a payment or miss a payment altogether, however, that will also be reported to the credit bureau and will negatively affect your credit score.
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