Can I Exclude a Credit Card from Chapter 7 Bankruptcy?

Posted By Law Office of Simon Goldenberg, PLLC || 24-Mar-2016

One of the most common questions regarding filing for Chapter 7 bankruptcy is whether or not a debtor can choose to exclude a credit card from their petition for bankruptcy. Some people wish to collect the benefits of having their debts discharged during bankruptcy but do not want to risk losing their credit card in the process. On the flipside, a person may wish to omit their credit card debt from their bankruptcy petition to protect a cosigner or guarantor from having their credit harmed. Unfortunately, this is not permitted.

Debtors who file for bankruptcy must disclose all of their debts and liability in their bankruptcy schedules. These schedules are signed under penalty of perjury and can expose a person to criminal penalties if they fail to disclose material information related to their financial situation. Withholding information about credit card accounts will also likely result in a denial of discharge.

What is “Reaffirming” Debt?

While a person cannot exclude a credit card from their bankruptcy petition, they can reaffirm their debt to improve their chances of being able to keep their card. In simple terms, this involves a person agreeing that their credit card debt will not be discharged and that they will still be responsible for paying the balance. Credit card companies will sometimes let bankruptcy petitioners who reaffirm their debt keep their credit card if they have had the card for a certain amount of time and carry a low enough balance.

This can be risky. Reaffirming debt is by no means a guaranteed way for a debtor to keep their card, as many credit card companies will cancel a debtor’s account upon learning of their bankruptcy filing. It is also important to remember that a person can only get a Chapter 7 discharge once every eight years. Debtors who are not 100% positive that they will be able to repay their balance within this timeframe should probably just take advantage of their discharge and apply for a new credit card after their bankruptcy is finalized. While these cards will often have sky-high interest rates, paying their balance off in full and on time every month can help a person slowly rebuild their credit over time.

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