Can You Get Credit Cards After Being Discharged From Bankruptcy?
Every time you check the mailbox, there is another credit card offer with your name on it. You’re not ready to take the bait, but these fast and furious pre-approved offers – even in the midst of bankruptcy – are tempting. But should you? The answer is yes, with a few caveats.
Used wisely, a credit card can help you start rebuilding your credit. But you will need to demonstrate that you can use credit responsibly. One way is to use a credit card for minor expenses and then pay off the credit card in full each month. Your payments and balances will be reported to the credit bureau, which will put you on the path to restoring good credit [source: McDowell].
However, you have to wait for your bankruptcy discharge to get a credit card, which can be up to five years if you have filed Chapter 13 and are still making payments. Opening a new credit account before your bankruptcy discharge may require the approval of a trustee [source: Rhode].
When a bankruptcy is discharged, which can take months or years from the time the bankruptcy is declared, you are no longer legally responsible for paying certain creditors. Specifically, you are not required to pay debts that have been discharged (forgiven) as a result of bankruptcy. Exceptions include debts that have not been paid and for which you have agreed to continue payments, such as a mortgage [source: U.S. Courts].
The day after your bankruptcy discharge, you can open a new credit card and start rebuilding your credit. This can be difficult because your bankruptcy can stay on your credit report for 10 years. And if you have filed for bankruptcy because of credit card debt, you need to be sure that you can now afford to pay off your card every month. If you are ready, however, you need to consider two types of credit cards: unsecured and secure.
Most people are familiar with unsecured credit cards: you borrow money from the credit card company when you make a purchase and agree to pay it back. You will want to pay off the credit card in full each month to avoid paying interest. As a high-risk borrower, it can be difficult to find an unsecured credit card, especially one with no high annual fees, monthly fees, and astronomical interest rates.
Secured credit cards are often offered to borrowers in high risk categories, such as those who have filed for bankruptcy. To get a secured credit card, you will need to deposit an amount equal to the credit offered to you. For example, to open a secured credit card with a limit of $ 200, you will need to pay $ 200 to the company that issued the credit card. Secured credit cards have low limits, often fully secured by the money the borrower has already paid. However, they may also have an annual fee, as well as an application or processing fee, so you will need to research them carefully.
With all credit cards, payments are reported to the credit bureaus. Paying in full each month will help your credit recover from bankruptcy [source: McDowell].