Chapter 7 Bankruptcy filers in Michigan who have a credit card account in good standing may think that it is a good idea to keep the account open. After all, if you already have an established credit card, it will save you the trouble of trying to get a new card after receiving your discharge. Also, it stands to reason that keeping the account around will help in your post-bankruptcy efforts to rebuild your credit score. However, credit card companies and the courts typically don’t like this strategy. In fact, this plan normally fails in a bad way. In attempting to keep a credit card open during Chapter 7 bankruptcy, the filer normally ends up with either an account in debt collections. Or, even worse, the court may dismiss the bankruptcy.
If a Michigan consumer who files for Chapter 7 bankruptcy has a credit card with a zero balance at the time of filing, that account is unaffected by the bankruptcy. Yet, consumers who find themselves in this situation should still close the card. Why? Because the issuer will most likely close the account anyway once it finds out about the bankruptcy.
Also, if the credit card company closes the account while the card carries a balance, the total amount owed goes into debt collections. This happens even if there is no delinquency. The worst part about this is that the debt is not dischargeable because it is not part of the bankruptcy. So, Michigan filers in this situation emerge from bankruptcy with extra credit score damage. Sadly, they must also deal with calls and letters from debt collectors.
In addition, if a Chapter 7 bankruptcy filer makes extra payments on a credit card to bring the balance to zero before filing, extra trouble awaits. This is because bankruptcy courts view this behavior as “preferential payment.” Ideally, all creditors affected by a bankruptcy should receive an equal portion of the bankruptcy estate. Therefore, if the court sees that you’ve given one creditor preference, it may dismiss the bankruptcy.
Some Michigan consumers have little trouble getting credit cards after Chapter 7 bankruptcy. Even with lower credit scores, they don’t have heavy debt hanging over their heads. Also, creditors know that those recently discharged cannot file for Chapter 7 again for another eight years.
Even if you cannot get approved for a “regular,” unsecured credit card, you can most likely qualify for a secured credit card. To open a secured card, you must provide a cash deposit. Normally, but not always, your spending limit on the card matches the amount of your deposit. Unlike prepaid cards, secured credit cards function just like regular credit cards. So, with responsible use and timely payments (which are reported to the credit bureaus), they can help you rebuild your credit score.
Another important part of rebuilding credit scores after Chapter 7 bankruptcy involves regularly checking your credit reports. Unfortunately, Chapter 7 filers in Michigan often find errors on their credit reports after discharge. For those who want to immediately start rebuilding their credit, this is bad news. Sadly, these types of credit report inaccuracies often harm credit scores.
So, immediately following your Chapter 7 bankruptcy discharge, go to www.annualcreditreport.com, and request free copies of your credit reports from TransUnion, Equifax, and Experian. The Fair and Accurate Credit Transactions Act (FACTA) entitles you to do this once every 12 months. Then, while reviewing your credit reports, if you spot any errors, contact Credit Repair Lawyers of America in Michigan.
Even if you have a great bankruptcy lawyer, we’re the firm to call afterwards because we understand credit reports and the credit bureaus better than anyone. Our team of credit pros will connect you with an experienced credit attorney who will fix your credit issues and get you clean credit reports for FREE.
Don’t let errors on your credit reports bring your credit score down. At Credit Repair Lawyers of America in Michigan, we’ve been cleaning up credit reports for consumers since 2008 for free. How do we do it? All of our fees come from the defendants in settled cases. This is why our clients pay nothing for the work we do.
Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (248) 353-2882 or contact us on our contact page.
For more information about Free Credit Repair, please visit https://creditrepairlawyersam.com/michigan/credit-repair/.
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