A Bankruptcy Lawyer’s Blog

After Bankruptcy Are Credit Cards a Good Idea?

For many people, credit cards have always been a temptation. A temptation to spend with no thought as to the monthly interest, let alone repayment. In recent years with the reverse in the economic climate, credit card spending has returned to haunt many people who have been overspending.

For the unfortunate ones who have gone through bankruptcy, the idea of a credit card can be repellent, given that this was probably the single most important thing that contributed to their downfall.

But is this a good idea? Sure, not having a credit card will stop them getting into credit card debt again, but this may not be the beat attitude to adopt.

What some people sometimes do not pay attention to, is what life is like after bankruptcy. Getting any sort of credit is tough as one’s credit rating goes through the floor.

Improving one’s credit rating should be a priority after bankruptcy, and the key is to show that one can manage money successfully, including debt.

Whilst chapter 7 is the most popular chapter to file bankruptcy under with about 85% of debtors filing under it, it destroys your credit rating. Chapter 13 however is an alternative that does not have quite the same disastrous effects because it is effectively a repayment plan, and as the repayments are met, so ones credit rating improves. The main drawback is that the terms of the repayment plan can make life a little tough, but no assets are sold unlike chapter 7.

An almost fool proof method of using a credit card is to get what is called a secured credit card. A secured card works with little risk to oneself, as the credit limit is fixed to an amount equal to the amount of deposit one has paid to the card issuer. That way, if one finds one cannot pay the card, the money is taken from the deposit. If one pays for goods and services this way, the credit bureaux can see that money is being used responsibly, and ones credit rating improves.

However, it is vital that one uses a card issuer who is registered with the credit bureaux, otherwise all ones spending and repaying will go unnoticed and not improve one’s credit rating.

Obtaining a credit card after bankruptcy is a real possibility, though it may not be the type one is used to. However, with little risk and the opportunity to repair a credit rating, they should not be written off.

For more free information on bankruptcy, including chapter 13 bankruptcy law, visit www.chapter13bankruptcylaw.net.