If I File Bankruptcy, Will I Ever Get Credit Again?
There can be many reasons people file for bankruptcy, and one large reason is often too much credit card debt. It is often debt that was easily handled before the loss of a job or a medical problem, but it is often the debts that bring people to my office here in New York. One question that is asked by everyone is whether they will ever be able to have credit cards again after they file for bankruptcy.
In today’s economy it is often necessary to have at least one credit card. While it is true that most transactions can be made with debit cards, some times a credit card is needed. A debit card, even though it looks like a credit card, only represents the money you actually have on deposit in your bank account. When you use it, the money is immediately taken out of your bank account. With a debit card you can purchase things online, pay for food at restaurants and in grocery stores, and complete most transactions.
A credit card is a loan from a bank where they give you a credit line upon which you can draw, up to the limit the bank has set. When you use your credit card, you are borrowing the amount of your purchase and will pay it back over time. While most transactions can be made with a debit card, some purchases need a credit card. You can use a debit card to purchase an airline ticket, you will need a credit card to reserve a hotel room or to rent a car. This is because the transaction is open ended, and the final amount will not be known until you leave the hotel or return the car.
Banks issue credit cards because they believe you will be able to repay the credit you use. They use credit reports and credit scores to make this judgment. The fact that you filed for bankruptcy will be on your credit report for 10 years from the date you file, but this does not mean you will not get a credit card for 10 years. Most people are able to get credit cards within a few years of bankruptcy. And you can get a secured card pretty soon after bankruptcy.
The credit cards you will be able to get after bankruptcy will usually have a small credit line at first and will come from second-tier banks, often banks you have never heard of. They will have high interest rates and may have annual fees. The important thing is to do your homework and make sure you know exactly what you are getting into. There are several very good web sites with information on credit cards and with a bit of searching you can find them and learn what kind of deals are available. Obviously, you should not use more credit than you can easily pay back, and should religiously make sure your payments are on time each month. As time goes by and you make your payments properly, your credit score will improve and you may be able to get larger and better credit cards.
With a secured credit cards, you deposit money with the bank and they give you a credit card equal to the balance you have on deposit. This is an actual credit card, and y our activity with a secured card will appear on your credit report, so it should be treated as you would a regular credit card, paying it monthly without fail. Some banks will increase your credit line above the amount on deposit as time goes on and you have made your payments on time. Eventually you will probably qualify for a regular card.
As with regular credit cards, you should find web sites, of which there are many, to see what deals are available for secured credit cards. There are many bad deals for secured credit cards, including some that take a large portion of your initial credit line as fees. Most charge an annual fee. Be sure you know the details before you sign up. Surprisingly, many large, well-known banks have secured credit cards, so ask where you bank to see if one is available.
Allan Bloomfield practices bankruptcy law in Forest Hills, Queens. Contact Allan today for a free consultation.
