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Credit Cards Bankruptcy - Bankruptcy and Credit Cards - Challenges to Declaring Bankruptcy with Credit Card Debt

How Bankruptcy Affects the Use of Credit Cards: Before and After

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With the economic crisis that began in 2008, many people in the United States have been faced with the issue of bankruptcy. For many such people, credit card debt is a major contributing factor to their bankruptcy. For others, their bankruptcy might prevent them from getting another credit card in the future. Therefore, it is very important to be informed about the issues surrounding credit cards and bankruptcy.

Challenges to Declaring Bankruptcy with Credit Card Debt

It is not uncommon for credit card companies to challenge the claims of cardholders who declare bankruptcy and are therefore unable to pay their debts. Under U.S. Bankruptcy laws, there is a provision that denies cardholders the right to discharge their credit card debt in their bankruptcy. This condition is possible if the credit card company can demonstrate that the card was used with no intent to repay the charges. Factors such as an increase in charges in the period before filing bankruptcy, a large cash advance shortly before filing, a tendency to exceed credit limits and shifting balances from one card to another, or a large amount charges after visiting a bankruptcy lawyer all could be cited as reasonable grounds for denying the cardholder the right to discharge their credit card debt in bankruptcy.

The best way to avoid this condition is to wait a reasonable period between making any credit card charges and filing bankruptcy. If you are concerned that you are in danger of being unable to discharge your debt, then consult a lawyer and perhaps delay filing bankruptcy.

Challenges to Getting a Credit Card After Bankruptcy

For those who have faced the unfortunate circumstance of having to file bankruptcy, it can be quite difficult to re-establish credit and find a credit card company that will issue them a card. The best place to begin re-establishing credit may be getting a secured or prepaid credit card. With these cards, you typically deposit a predetermined amount, usually between $300 and $500, that you can then spend with the card.

More traditional credit cards are also available to those who have recently filed bankruptcy, but these cards often come with a high fee and a low credit limit. Before applying for any card, it is important to be knowledgeable about the card because any credit application will stay on your credit file for two years. Many companies prey on those who need a new credit card by charging exorbitant fees, so be sure you know everything you can about the card issuer before applying. Sites like Creditcards.com provide information on most card companies.

If unrestrained credit card spending was a major factor in your bankruptcy, then it is important to exercise extreme caution if and when you get a new credit card. Although some might suggest that you abandon the use of credit cards altogether, there are many circumstances when it is necessary to have a credit card, or at the least, a debit card.

Rebuilding credit after bankruptcy is possible, but it requires discipline and caution, especially when it comes to credit card spending.

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