California Bankruptcy: Playing Favorites with Your Creditors - Westgate Law

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California Bankruptcy: Playing Favorites with Your Creditors

Many individuals in today’s society are far too reliant on their credit cards. At the very least, they view them as their emergency option. When declaring bankruptcy, the credit card safety net too many of us rely on is traded in for a complete discharge of the debt. It’s well worth it and easily replaced by carefully considering the options and choosing a reputable secured credit card for use after bankruptcy, but some filers find themselves attempting to avoid listing certain creditors in order to “keep some credit.”

Bankruptcy filers mistakenly believe that if they choose not to mention a certain creditor to their bankruptcy attorney, they will retain access to that credit. They think they’ll be able to keep that one card aside for use in “emergencies.”  This is not a good plan. Every creditor should be included in the petition. Every creditor and debt should be listed for discharge so ALL debts can be eliminated through the bankruptcy.

Playing favorites with your creditors doesn’t work. Even if you hid your “favorite” emergency card away and didn’t mention it throughout your bankruptcy process, your creditors regularly review your credit (generally on an annual basis) and they will fairly quickly determine that you are no longer eligible to utilize the account as previously agreed upon. Your access is bound to end abruptly. Many credit accounts are owned by the same parent company or are serviced by the same company. This means that you could have another creditor listed on the petition that handles the credit card you failed to list. They’ll shut down your “favorite” emergency card and you’ll end up having to pay to add that prepetition creditor to your bankruptcy petition. You might even find yourself having to pay on a closed card after you’ve gone to the trouble of declaring bankruptcy simply because you attempted to remove it from your bankruptcy proceedings and it wasn’t discharged.

Some savvy creditors even have themselves set up to receive universal notification of bankruptcy filings. This means that your “favorite” card could be shut down even if you don’t have it listed on the petition and you have no other connections to the lender (debt or otherwise). It doesn’t even matter if you have a balance. Your “favorite” emergency card will probably be shut down regardless of a $0.00 balance.

List all possible credit. If you find yourself unsure how you will function without at least one emergency card, never fear, you will receive so many offers for credit post-bankruptcy that it will make you dizzy. Creditors know that you have a history of “credit love” and they will want to be first in line to get you back in their clutches. If you approach it with a newfound sense of self-preservation, you can turn the situation to your advantage. The interest rates on new credit offers post-bankruptcy will be high, but simply pay your balances each month and you’ll find you have plenty of available “emergency” credit and you’ll never need to pay finance charges again.

Life after bankruptcy can be good. Don’t assume the worst. Make the most of the fresh start bankruptcy is offering you. For questions about rebuilding your credit after bankruptcy call the California bankruptcy experts at Westgate Law.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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