Now, I am personally not facing this issue (at least, anytime soon), but I was curious. This is primarily a question of practicalities rather than strict legalities.
Apparently in the US, if you are filing for bankruptcy, and on the day that you file, you have a credit card with a zero balance (that is, you owe nothing on the card), you are not required to include it in a bankruptcy filing, and the credit card company doesn’t have to be formally notified (though they may find out because bankruptcies are public records).
I’ve seen indications online that many credit card companies will cancel your card if you file, after they notice it on the public records circuit, even if they didn’t lose anything because you didn’t owe them anything to begin with.
I’ve also heard tell of people coming home from Bankruptcy court to find credit card solicitations waiting for them from banks that know that now that the person cannot file for many years, so they are reasonably safe (or at least in the next few days).
What’s the straight dope? Why would some banks be falling over each other to give the newly bankrupt credit cards while others are cancelling the cards of the newly bankrupt?
You’re right that you don’t have to claim all credit cards. You don’t even have to claim ones with a balance, though that might be counter to the point of a bankruptcy.
The companies do usually cancel the cards as part of the proceeding. I’ve seen this happen with some clients. I don’t know exactly what criteria they use, but I’d be surprised if any would let a normal card survive a bankruptcy.
The offers you’re deluged with following a bankruptcy are almost all for secured cards with high annual fees and high interest rates. In other words, you pay them $500 to get a $500 limit; then they charge you 30% if you don’t pay the balance each month, plus a $150 annual fee. (This is taken from a real offer I saw from a client who filed last year). Because the card is secured up to its limit, the bank can’t really lose any money - if you default on payments, they keep the security to pay it off.
Obviously, this kind of card would not be desirable to someone who had any other options.
It works both ways. If you have a credit card the USUALLY cancel it. But not always. Now it’s more common to have it canceled because credit card companies are more actively checking credit reports.
Will you get more offers? Probably but maybe not. The credit card companies will issue new cards because you can only declare Chapter 7 once every ten years. Therefore they know they have ten years, to collect from you. Of course you could always file Chapter 13.
In the past banks issued credit a lot more freely than they do now.
When you file bankruptcy, you make a list of the debts that you want discharged. There’s no requirement that you seek to discharge every debt. Home mortgages and auto loans are the most common cases of debts that are voluntarily kept (because the property would be seized/foreclosed on first). Businesses will often not discharge debts owed to key vendors or suppliers because they need to maintain that relationship.
Obviously, it’s to your advantage to list credit cards for discharge, but you don’t have to.
Negative. You must by law list everything. For debts you want to “keep” you’d sign a reaffirmation agreement, but those aren’t used for unsecured debt. You may voluntarily choose to repay a credit card after filing, but you cannot be compelled to do so after you get your Discharge.
If people are picking and choosing what they list, they are violating the law.
I thought bankruptcy was an all or nothing deal - you either asked the court to discharge all debts that are legally dischargeable, or you either don’t file bankruptcy or withdraw your bankruptcy petition.
There are some debts that appear to be nondischargeable, such as child support, but that is the decision of the law that they are not dischargeable, it is not a matter of you making a decision as to whether or not you want it discharged.
It sounds like my understanding of bankruptcy is wrong, then.
I deal with it from the accounting and tax side, so I’m more focused on making sure information is complete and correct rather than trying to do anything with it in a legal sense. I’ve had probably a dozen clients file bankruptcy for business and/or personal debts in the last two years. I make sure business or personal net worth statements show all assets/liabilities… but virtually everyone has made comments regarding debts they will “keep.” I suppose it could be a case of a discharged debt that they intend to repay, but they’re definitely not phrasing it that way.