Should you apply for a credit card after Chapter 13?

Once you have filed for Chapter 13 bankruptcy, you may feel as though you are getting back on track with your finances. Chapter 13 helps debtors set up a payment plan to repay their debt over a certain period of time. In some cases, the bankruptcy decreases the amount of debt you owe through negotiations with creditors. A bankrupcy, however, can affect your credit score and may make it difficult to apply for loans or qualify for other financial items as well. Some people may turn to using a credit card as a way to rebuild their credit once their bankruptcy has been discharged. You should be extremely careful when doing this, as some credit cards are not designed to help you financially. 

Subprime credit cards market to people who have low credit scores, and typically do not qualify for prime credit cards. Yet, these cards often come with higher interest rates and you may end up struggling to repay your balance. According to Nerdwallet, there are more than 48 million people in American that have credit scores below 600. In order to provide credit to these people with lower credit scores, subprime card companies add other fees, rates and interests, such as maintenance fees, processing fees, annual fee and processing fees, on to the balance to compensate for the risk. 

Credit cards can be a good way to rebuild your credit score when used properly. Be sure to always pay off the balance if possible. Also, prepaid cards allow you to put money on the card beforehand. 

This information is intended to educate and should not be taken as legal advice.

 

 

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