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
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
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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