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Credit Cards After Bankruptcy: Friend Or Foe?


Your friend’s dad knows a guy who has filed for bankruptcy five times, once after each divorce.  When that guy goes out to eat with his friends, he orders the cheapest item on the menu and pays for it with crumpled banknotes and the occasional roll of quarters.  You are not that guy; you only filed for bankruptcy once, and as soon as you have your finances in slightly better shape, you plan to propose to your significant other.  You can understand that guy’s “once bitten, twice shy” attitude toward credit cards, though.  Now that the court associates your name with the word “bankrupt” with your name, the idea of swiping a plastic card and authorizing someone to add to your debt obligations, or even authorizing someone to take money out of your bank account, fills you with trepidation.  Everyone is a broke chump, but not everyone is bankrupt.  Believe it or not, using credit cards after bankruptcy, even when there is money in your bank account, can be a wise move.  A Plantation bankruptcy lawyer can help you get started.

Rebuilding Your Credit, or Just Perpetuating the Cycle of Debt?

Filing for bankruptcy does not mean that you can never borrow again.  Most bankruptcy filings start with people spending beyond their means with credit cards, either because they couldn’t afford necessities without credit cards or because they simply lost track of how much they were spending.  Therefore, it makes sense that the surest way to avoid another debt crisis resulting in another bankruptcy filing is to go on a cash only diet.  That is fine for small purchases, but do you want to qualify for a home mortgage in the future?  If so, you will need to build your credit history in order to qualify.

Why Establishing a New Credit History After Bankruptcy Is Important

Repairing your credit after a bankruptcy filing isn’t about borrowing; it is about being able to borrow.  Having a credit card and never buying anything you can’t afford are not mutually exclusive.  Your credit score depends in part on your credit to debt ratio.  If you open a credit card account when there is a recent bankruptcy filing on your record, you probably will not qualify for a very high credit limit; in some cases, you might need to start with a secured credit card.  Even if all you can get to start with is a secured credit card with a $200 limit you should make at least one small purchase per month and then pay it off before the end of the billing cycle.  The purchase you charge on your credit card should be something you were going to buy anyway, such as a fill-up at the gas station.  If you continue to be this cautious as your credit limit increases, it will eventually help you qualify for bigger loans like car loans and home mortgages.

Focus on the Big Picture With a Bankruptcy Lawyer

A South Florida bankruptcy lawyer can help you make the best financial decisions for your future after filing for bankruptcy.  Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.



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