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What to Do With Credit Cards Before Filing Chapter 7

Published December 16, 2021 by Sasser Law Firm
What to Do With Credit Cards Before Filing Chapter 7

There is a lot of confusion around bankruptcy. What is and isn’t off-limits? Can you still use your credit cards when you file? What happens to credit cards in chapter 7? It can be challenging to navigate how to keep your household running while being buried by a mountain of debt.

You need to know when to stop using your credit cards before filing chapter 7 and what to do with those credit cards as you move through the bankruptcy process. At Sasser Law Firm, we know you have questions about bankruptcy. We’ve outlined what you can expect from the bankruptcy process and when continuing to use a credit card can hurt more than it can help.

Can I Use My Credit Card Before Filing for Chapter 7 Bankruptcy?

Yes, you can. However, the better question is, should you? Using credit cards before filing for Chapter 7 bankruptcy can have downsides. Chapter 7 bankruptcy proceedings can potentially discharge many forms of debt, including credit card debt. However, if someone goes on a spending spree before filing for bankruptcy and purchases items that are not necessities, the creditor can object to dischargeability. That said, such objections are rare.

Purchasing luxury items or services, or goods or services totaling $725 or more, are presumptively fraudulent if purchased 90 days before filing. The credit card company can challenge whether the debt should be discharged and the burden of proof will be on the debtor not the creditor. If the credit card company wins, the debt will not discharge. Such objections are not common.

If you know for certain you are filing for bankruptcy you should not incur debt you don’t intend to repay.

Should I Stop Paying My Credit Card Before Filing for Chapter 7 Bankruptcy?

It is usually not wise to stop making payments on credit card debt until you are sure that filing for Chapter 7 bankruptcy is the right option for you. You may also want to consult with an experienced bankruptcy attorney before making decisions about stopping payments and filing for bankruptcy. You will hurt yourself legally and from a credit reporting perspective if you stop paying servicing your credit card debt and then realize bankruptcy is not the right choice for you.

However, if you are certain you will be filing for bankruptcy then it is absolutely appropriate to stop paying on your credit card debt even if that may not be for some period of time. If you do choose to default on a credit card debt you would want to withdraw funds from an institution where you owe money. So if you maintain a checking or savings account at a bank or credit union to whom you owe money, you would want to withdraw your funds prior to default and/or bankruptcy.

Can I Max Out My Credit Card Before Chapter 7 Bankruptcy?

If you have made the decision to file for bankruptcy, you should not incur additional debt that you do not intend to repay. If you choose to incur debt after you have decided to file for bankruptcy that can have negative ramifications. Especially if the purchases are luxury purchases such as fine dining, entertainment, jewelry, discretionary travel, etc.

Am I required to list all of my credit cards when I file for bankruptcy?

No. You are only required to list credit card obligations for which you owe a balance when the case is filed.

Will I lose my credit card privileges if an account is at a zero balance and not listed in the bankruptcy paperwork?

Generally speaking yes. In the year 2022, credit card companies find out about your bankruptcy and cut your privileges even if there is no balance.

Can I get a new credit card after I file for bankruptcy?

Generally speaking, yes.

Should I “zero out” my credit card debt in order to retain my charging privileges?

Generally speaking, no. You will lose your charging privileges regardless of zeroing out the debt.

I am a member of my credit union, what should I do?

If you owe your credit union money, you should move your banking relationship to an institution that you do not owe any money to.  A bankruptcy filing where the credit union suffers a loss will generally result in the loss of membership privileges.

Contact a Chapter 7 Bankruptcy Lawyer in Cary, NC Today

The attorneys with Sasser Law Firm have extensive experience handling Chapter 7 bankruptcy cases. We have the skills and resources to help you with unmanageable debt.

At Sasser Law Firm, there is no fine print. We give you straightforward information about your legal options and how we operate. If you are considering filing for Chapter 7 bankruptcy, contact our office for a free consultation or call us at (919) 319-7400.

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