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A lawyer recently instructed me not to reaffirm any of my credit cards in bankruptcy even though I wanted to and have not been late on any credit card payments. Is this good advice?
If you reaffirm your credit card debt in bankruptcy, you essentially agree that your credit card debt will not be discharged. At the end of the bankruptcy, when your other unsecured debts are wiped out, you will still remain on the hook for your credit card debt. (Learn more about reaffirming debts in Chapter 7 bankruptcy.)
Once you receive a Chapter 7 discharge of debts, you cannot get another Chapter 7 discharge for eight years (four years for a Chapter 13 discharge). So, if you have a large balance on your credit card and there's a slight possibilty you won't be able to pay it down the line (say, for example, you are temporarily unemployed in the future), it's probably best to get rid of it now.
Many people want to reaffirm their credit card debt so they can keep their card. But even if you reaffirm the debt, the credit card company can (and very well might) cancel your card when you file for bankruptcy. Then you'll be on the hook for the debt, and you won't have the use of the card. Not a great result.
If you really need a credit card (for emergencies or business travel so that you can book hotels, and the like), then sign up for a card after your bankruptcy. You're likely to get tons of offers, although those offers will come with very high rates and fees; which means you should use it only when absolutely necessary.
In some circumstances it might make sense to reaffirm your credit card debt. For example, if you have a very low balance and have had the card for a long time, you might want to reaffirm it. Talk with a local bankruptcy attorney about your best options. An experienced attorney may also know what your particular credit card policies are. That is, whether it is likely to cancel the card even if you reaffirm, or not. (You can find a bankruptcy expert in your area through Nolo's Lawyer Directory.)
Learn more about credit card debt in bankruptcy.
by: Kathleen Michon, J.D.
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