A credit card, the biggest beneficiary of the Marquette Bank decision (Photo credit: Wikipedia)
Believe it or not, debtors who have filed for bankruptcy protection are much more likely to get credit card offers immediately after the discharge of their bankruptcy than people who just have bad credit. Nevertheless, you might want to beware of new credit card offers after filing bankruptcy.
Because credit has become such a part of our society in renting, getting utilities, traveling, and for a variety of other necessities, it is important to have decent credit. Unfortunately, for people who have been down on their luck and failed in the credit part of their finances, they often struggle with what most of society takes for granted. So, it is not unusual to get questions about building your credit after a debtor has had to file for bankruptcy protection.
One of the best and fastest ways to build credit is through getting a credit card. Getting a credit card is much easier than most might think after filing for bankruptcy.
One such debtor blogging on a bankruptcy forum website recently posted these observations and questions about getting an unexpected credit card offer in the mail: “Just wanted to say how crazy is it that since we filed 6/27, we have started to receive car financing offers & credit card offers. I realize they know we cannot file for 8 years – but still how crazy is this??? I didn’t expect any (not that we want any) until we were discharged.”
Here are two facts you may want to consider before accepting a new credit card that are associated with the reasons credit card companies are willing to extend you credit after you have filed for bankruptcy protection:
Creditors know bankruptcy and credit reporting laws just like anyone else. It is true that you cannot file a Chapter 7 for eight years after having a Chapter 7 discharge. You can file a Chapter 13 bankruptcy in four years after the discharge of a Chapter 7. A Chapter 13 gives creditors a better chance of getting repaid than a Chapter 7. Four to eight years is a long time for collection agencies to chase your assets, hound you for payments, and sue you for judgments.
Most of the credit card offers you can get after filing bankruptcy come with very high interest rates, annual fees, monthly maintenance fees, lower limits, and short payment periods. With interest in excess of 25%, it doesn’t take too many minimum payments before the cost of the extended credit kicks into high gear. You may end up paying not only the interest and principal, but you may end up paying penalties, fees, and legal costs for collections.
You will need to start rebuilding your credit as soon as possible, but you really need to beware of new credit card offers after filing bankruptcy. If you did not have the discipline to handle extended credit from credit card usage the first time around, have you learned enough about yourself and the discipline it will require to make these kind of high risk payments on time every time?