What to know about credit cards after bankruptcy

On Behalf of | Jun 8, 2021 | blog, credit card debt |

Many New Jersey consumers who are overwhelmed by their financial obligations file for bankruptcy to obtain some debt relief. After discharge, many of them have the goal of rebuilding their credit. While it’s possible to do so, getting credit cards can get tricky after bankruptcy.

Bankruptcy impact on credit scores

The discharge remains on the consumer’s credit report for several years based on the type of bankruptcy. A Chapter 7 bankruptcy trustee liquidates nonexempt assets and sells them to pay creditors. It removes unsecured debts, such as credit card debt, and medical bills, but the bankruptcy may remain on a credit report for ten years.

Chapter 13 bankruptcy allows debtors to construct a plan to pay back their debt without selling assets. IF the court approves it, they have three to five years to complete it, and a Chapter 13 bankruptcy remains on credit reports for seven years.

Applying for credit cards after discharge

Debtors with a bankruptcy history may apply for credit cards soon after the discharge, and consumers commonly get many offers after it. However, other creditors could hesitate to approve consumers with bankruptcies, because they want someone who they can trust to pay them back. Even if they approve the applicant with a bankruptcy, they commonly apply higher interest rates and fees.

Debtors with a discharge on their credit report will more likely get approved for a secured credit card. A secured credit card requires a deposit, which is the credit limit or slightly lower than the limit. Credit inquiries may lower your credit score, so consumers shouldn’t apply for too many cards at once. Some credit cards offer pre-qualifying tests, which won’t affect the credit score.