Credit cards are one of the most common sources of debt among Americans today. Although not the main factor behind bankruptcy cases, they certainly can contribute to an already fragile financial state. When it comes to using credit cards and filing for bankruptcy, there are a few things you should know.
The timing of your credit card purchases in bankruptcy is important. If you are considering bankruptcy, using credit cards to purchase items could be a problem. The general rule is that you should not be accumulating new debt, especially from nonessential living items, at least 90 days prior to filing. Also, it is a good idea to refrain from using credit cards while in an active bankruptcy case. The court could view the use of a card in bankruptcy as fraudulent or inappropriate.
While you generally won’t be asked to return items purchased on credit cards as a form of liquidation, there is no guarantee. In a Chapter 7 bankruptcy, nonessential living items can be used to satisfy debt payments. If you were to purchase frivolous items prior to filing you could be asked to give up those items to satisfy debt payments.
After a debt discharge, there is no rule prohibiting you from using credit cards again. However, you could find that finding new credit cards is a challenge. At this point, you should be using credit as a tool for establishing a new, positive credit history. Therefore, take your time in finding one line of credit that you can use to make planned purchases and timely payments.