Yes, most of your credit cards will likely become null and void after you file for bankruptcy. Here’s how it typically works:
1. Chapter 7 Bankruptcy:
- Debt Discharge: In Chapter 7 bankruptcy, most of your unsecured debts, including credit card debts, are discharged. This means you are no longer legally obligated to pay those debts. Once the credit card debt is discharged, the card associated with that debt will generally be canceled by the issuer.
- Zero Balance Cards: Even if you have a credit card with a zero balance when you file for bankruptcy, the credit card company may still close the account. This is because bankruptcy is a red flag for creditors, and they may choose to limit their exposure to risk.
2. Chapter 13 Bankruptcy:
- Repayment Plan: In Chapter 13 bankruptcy, you create a repayment plan to pay off some or all of your debts over three to five years. Credit card debts are included in this plan. Even though you may continue to pay off the debt under the repayment plan, your credit cards will usually be closed by the issuers once they are notified of your bankruptcy filing.
- Reaffirmation Agreements: While it’s rare, in some cases, you might enter into a reaffirmation agreement with a creditor, which allows you to keep the card and continue making payments on it. However, most credit card companies are unwilling to enter into such agreements.
3. Credit Card Issuer’s Decision:
- Regardless of the type of bankruptcy you file, the credit card issuers have the discretion to close your accounts. Filing for bankruptcy is a significant negative event in your credit history, and most creditors will close your accounts to protect themselves from future risk.
4. Impact on Secured Credit Cards:
- If you have a secured credit card (one that requires a cash deposit), the situation might be different. The issuer might allow you to keep the card if the account has a zero balance and you continue making the required deposit payments. However, this too depends on the issuer’s policies.
5. Future Credit:
- After your bankruptcy is completed, you’ll have the opportunity to rebuild your credit. This might involve obtaining new credit cards, typically secured ones, and using them responsibly to demonstrate your ability to manage credit.
In summary, filing for bankruptcy usually results in your credit cards being closed by the issuers, regardless of whether they have a balance.
