Credit Cards After Bankruptcy

Written by Jared Vincenti
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While the word has sinister implications, bankruptcy is actually part of Federal law meant to help debtors. When a person can in no foreseeable way pay off all of his debts, he can declare bankruptcy. Alternately, creditors can try to force a delinquent account-holder into bankruptcy. In the vast majority of cases, bankruptcy is voluntary. However, three or more creditors can collectively force a debtor into bankruptcy.

There are many chapters of the Federal Bankruptcy Code, the most common being Chapter 7. When filing for Chapter 7 Bankruptcy, an individual's assets are liquidated, and the money used to pay off creditors. Even if this does not cover all debt, the individual is discharged of these obligations. Not all obligations are discharged by bankruptcy, though--student loans, mortgages, taxes, and criminal fines are still held against the debtor.

Recovering from Bankruptcy

Once you have filed for bankruptcy, your credit record is wiped clean. You cannot receive any formal credit for the following seven years, after which time you can apply for credit. However, you have no credit after bankruptcy, and you need to rebuild your credit rating.

Since it is hard to get a credit card with no credit, what many people will do is apply for secured credit cards after bankruptcy. These cards require a deposit, which is held by the creditor to be used towards payment should the client fall behind. This allows someone to regenerate a credit score after bankruptcy at minimal risk to the creditor.


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