Bankruptcy and Credit Cards

The impact of bankruptcy on credit cards, both immediate and long-term

Filing bankruptcy is a big decision that comes with both benefits and consequences. The type of bankruptcy a person files for will determine how their debt is affected. In some cases, a person can count on a large portion of their debt being removed. In some situations, it is obvious when someone is not going to be able to pay back the debt owed. On the other hand, some people have their debts reorganized in a way that makes it possible to pay them back over the course of the next several years. Whichever option someone in debt ends up with, credit cards are impacted right away and in the future.

Immediate Impact

It takes time to get things worked out when it comes to bankruptcy. Even if credit card payments are due, once a person takes the first step towards filing, the phone calls and collections stop and the payments are all put to a halt until everything is resolved. Regardless of the type of bankruptcy filed, the accounts are closed once the decision has been made and someone files for bankruptcy. There is also an immediate effect on the person`s credit rating.

When filing for bankruptcy, both immediate and long-term consequences have to be considered when it comes to credit cards, in order to make informed decisions.

Ironically, when a person files for bankruptcy, it isn`t unusual to immediately get offers for new credit cards. Lenders realize that someone can only file every eight years, so there is very little chance that there will be a problem. Because the number of people that file more than once is very low, creditors don`t mind taking a risk. It is important to note that the interest rates charged and the fees associated with these cards tend to be higher than normal.

Future Impact

Despite the opportunities for new credit cards after a bankruptcy, most people find that they are stuck working with cards that end up costing more than some of the mainstream options. However, it is possible to begin to make real improvements to their credit score, despite bankruptcy, after a couple of years. By making all payments on time, never taking out too much credit and maintaining financial consistency, it is possible for things to improve.

Sometimes, one of the requirements for filing bankruptcy is taking a class that discusses how to manage finances and how to keep an eye on debt. The information provided often helps people take advantage of their fresh start and make changes that will help them avoid financial pitfalls in the future. It is possible to begin to see offers for credit cards that don`t have the higher interest rates and fees sooner rather than later when someone is committed to keeping an eye on their finances.

It is important to seek out advice from bankruptcy advisors as soon as possible if there is a chance that bankruptcy is the answer. This allows individuals to find out what their options are and consider both the short and long-term effect that bankruptcy will have on credit cards. Informed consumers tend to make better decisions for themselves and their futures.

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