Getting a Credit Card After Bankruptcy

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Millennial couple review options for getting a credit card after bankruptcy filingCan I get a credit card after I declare bankruptcy?” It’s a question we’re asked often during consultations. The answer is usually yes, and for many people, a credit card can be a useful tool in rebuilding credit post-bankruptcy. But there are some drawbacks to getting a credit card in the aftermath of filing for bankruptcy, and you have to ask yourself if it’s the right tool for you.

Can you get a credit card after bankruptcy? Should you get one? In this article, we’ll look at the considerations and answer some of the questions that may be on your mind.

How Long Do You Have to Wait After Bankruptcy to Get a Credit Card?

You can get a credit card immediately after a bankruptcy is filed.  You do not have to wait until discharge. Depending on whether you filed Chapter 7 or Chapter 13, the process will vary.

  • Chapter 7 Bankruptcy: You will get a better card with better terms if you want until after discharge.  Discharge is quick, typically about 3 to 5 months after filing. You can start applying for credit cards whenever you want.
  • Chapter 13 Bankruptcy: You can be able to apply for credit during the repayment plan, but you need trustee approval.  Typically the trustee will want to see a track record of making your chapter 13 payments on time.  If you missed or late chapter 13 payments, the trustee will probably not approve a card.  When it is approved, you will only be allowed a low spending limit and the trustee might require you to pay it off in full each month.

Once your bankruptcy is discharged, it will be easier to get a credit card. Since most people see their credit score falls when a bankruptcy is filed, the longer you can wait to get a card, the better the credit card terms will be. 

Tips for Getting a Credit Card After Bankruptcy

  • Make a plan: Initially, you may only qualify for cards with high interest rates and low credit limits. You may want to set limits on when you use this card. As you rebuild your credit, more options will become available.
  • Check your credit report: Make sure that everything is correctly reported. Errors happen more often than you might think.
  • Pay bills on time every month: Late payments are like shooting yourself in the foot. They’re an instant ding – and they cost you. Make sure you’re paying on time and set up an autopayment system if needed.

Is a Credit Card the Right Move After Bankruptcy?

While credit cards are extremely convenient for day-to-day life and can be a valuable tool for rebuilding credit, you should ask yourself if it’s the right tool for you. 

The financial terms are less favorable after bankruptcy. High interest rates and low credit limits can make it easy to fall back into debt if not managed carefully. The primary goal of bankruptcy is to position yourself for long-term financial stability. Here are some key points to consider:

  • Interest Rates: High interest rates can quickly accumulate debt if balances are not paid in full each month.
  • Timing:  Credit card obtained shortly after filing for bankruptcy will typically have unnecessary fees like set up fees, annual fees, and high late fees.  Avoid these cards.  Waiting a short time after bankruptcy will allow you to get cards without these extra fees.
  • Credit Limits: High credit limits may tempt overspending.
  • Financial Habits: Develop habits like spending only what you need and paying off the balance every month.

Credit cards can be extremely convenient and effective for building credit, but they must be used responsibly to avoid falling back into debt. For more information, check out these additional tips for improving your credit after bankruptcy.

Are There Other Options Besides Credit Cards After Bankruptcy?

If you’re hesitant about getting a credit card after bankruptcy for whatever reason, good news – there are alternatives for financing day-to-day life and rebuilding credit for the future.

  • Get a personal loan from a credit union: Some credit unions offer small personal loans specifically designed to help rebuild credit. Credit unions usually provide lower interest rates and more favorable terms than traditional banks.
  • Consider starting with a secured credit card: A secured credit card requires a deposit, which serves as your credit limit. This allows you to rebuild your credit without the risk of debt.
  • Become an authorized user on someone else’s account: Ask friends or family if you can join their account as an authorized user. This will allow you use of a credit card in emergency situations without the high interest rates post-bankruptcy credit cards often bring.
  • Credit builder loans: Many banks offer these small loans held in a bank account until the debt is paid off: It builds credit with manageable payments and demonstrates the ability to repay debt.

What Do You Need to Know About Credit Cards After Bankruptcy?

Bankruptcy is a significant decision, and if you’re considering it, you probably have many questions, so be sure to check out our Bankruptcy FAQs! Rebuilding your credit after bankruptcy is possible, and there are various tools and strategies to help you along the way. The right credit card can help or hinder the process, so it’s important to know all of the facts and have a plan.

If you have questions about bankruptcy filing or need guidance, we’re here to help so get in touch with us. Our experienced bankruptcy law firm offers free consultations to discuss your options and provide the support you need.

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