Bankruptcy and Credit Cards

People contemplate bankruptcy for different reasons.  For some, their financial circumstances are dire all around.  However, for others, bankruptcy is a solution to specific debt that is insurmountable.  When this is the case, a major question for a lot of people is whether or not they must include all of their debt in bankruptcy or whether they can exclude certain things such as a credit card for which the payments are current.

What is Reaffirming Debt?

By law, any debt with an outstanding balance, including credit card debt, must be included on a bankruptcy.  Credit cards can only be excluded from a bankruptcy if there is currently nothing owed on them.  However, those who wish to reaffirm credit card debt through their bankruptcies may be able to do so with the credit card company’s approval and cooperation.

Reaffirming credit card debt is essentially reaching an agreement with the credit card company that you will continue to maintain the account in good standing.  At the company’s discretion, they may agree to allow the account to stay open under such circumstances.  Some credit card companies may place a hold or freeze on a credit card until the balance is paid to zero as a guarantee that the account will be paid or may reduce a customer’s limit temporarily until the customer demonstrates the intentions to continue making payments on the card is legitimately.  It’s important to remember that if a credit card or line of credit is reaffirmed in a bankruptcy, one maintains responsibility for that debt.  There is no court-ordered protection if payments are defaulted.  However, for those who re-affirm debt and continue to make payments, it is one of the fastest ways to re-establish one’s credit after a bankruptcy.