The bankruptcy law is designed with the purpose of giving an honest debtor a financial fresh start by discharging his debts.
So, if you are filing bankruptcy, why would you want to hold on to one of your credit cards?
To me, it appears the answer is simple: Emergencies. Many people are afraid that if they don’t have access to a credit card, they won’t have funds for an emergency. This brings to mind my freshman year of college. As an 18 year old, I was taken in by that free t-shirt! I did ask my parents if I should get a credit card. Their answer, “It’s a good idea to have one for emergencies”. The only thing wrong with this statement, I found that I found myself in a lot more situations I felt qualified as “emergencies”, where I would use that dependable credit card.
If life, there are valid emergencies and in those moments, knowing you have a credit card to fall back on to help you out of the mess is gratifying. However, don’t you think it would be even more gratifying if you could fall back on your savings and not have to rely on a credit card company to help you in an emergency? Filing bankruptcy and achieving that fresh start is a great time to break yourself of the myth, perpetuated by the credit card companies, that credit cards are the solution to life’s emergencies. Just think, after you have eliminated your debts with your bankruptcy, you can take that minimum payment you were sending to the credit card companies each month, $100/month as an example, and pay it into your savings account. With your own emergency fund, you could concentrate on rebuilding your credit without worrying that one emergency will send you back into debt.
Within a surprisingly short amount of time, you can create an impressive emergency fund. Get a flat tire? You’re covered. Tooth starts aching and need to run to the dentist? No need to pay for that trip to the dentist for a year after your tooth is fixed if you have an emergency fund available to cover the cost.
The court requires that all people filing bankruptcy list every creditor they owe money to on their bankruptcy petition. When signing their petition, I advise all clients filing Chapter 7 or Chapter 13 that they are declaring they have done so under penalties of perjury. I am not an 18 year old college freshman anymore, so as much as I would like to think that my advice is being followed, I know that is not always the case.
I am well aware of clients who have attempted to keep one of their credit cards off of their bankruptcy with the goal of continuing to use it. Unfortunately, your creditors can still find out about your bankruptcy filing if you do not list them on your petition. Credit card company subscribe to a notification service that will deactivate accounts of customers who file bankruptcy. Once this happens, they are left with no credit card, and they have failed to disclose the debt in their bankruptcy, as required by law.
So, create your OWN emergency fund. One that will take your dependence off of that credit card to get you out of a jam and let you rely on yourself, putting you in control of your financial future.
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