What Happens to Your Credit Cards After Bankruptcy in New Jersey?

Filing for bankruptcy is a major financial decision that can significantly impact your credit cards and overall financial situation. In New Jersey, understanding the implications of bankruptcy on your credit cards is essential for making informed choices. This article explains what happens to your credit cards after declaring bankruptcy in New Jersey.

When you file for bankruptcy, an automatic stay is issued which halts all collection activities from creditors. This means that any credit card companies cannot pursue you for payment during the bankruptcy process. However, the outcome for your credit cards post-bankruptcy depends largely on the type of bankruptcy you file for: Chapter 7 or Chapter 13.

Chapter 7 Bankruptcy: In a Chapter 7 bankruptcy, most of your unsecured debts, including credit card debts, are discharged. This means you are no longer legally obligated to pay these debts. As a result, your credit card accounts will typically be closed by the credit card companies. However, some creditors may choose to allow you to keep accounts open, but this is rare. Any remaining balances will be wiped clean, providing a fresh financial start.

It is important to note that while your credit card debts are erased, filing for Chapter 7 can remain on your credit report for up to 10 years, negatively impacting your credit score. This can make it challenging to secure new credit cards or loans in the future.

Chapter 13 Bankruptcy: Chapter 13 bankruptcy, on the other hand, allows you to reorganize your debts and create a repayment plan over three to five years. Your credit cards will not be discharged until the completion of this repayment plan. During this time, you may need to continue making payments on some of your credit card debts, especially if they are part of your repayment plan.

While your accounts may remain open during Chapter 13 bankruptcy, making consistent payments can positively affect your credit score once the repayment period ends. If you successfully complete the plan, the remaining unsecured debts, including credit cards, can be discharged.

Rebuilding Your Credit: After bankruptcy, whether you file for Chapter 7 or Chapter 13, you may want to work towards rebuilding your credit. Start by obtaining a secured credit card, which requires a cash deposit as collateral. This allows you to establish a positive payment history while you gradually improve your credit score.

Additionally, monitoring your credit report for errors and staying current on any remaining debts will help you rebuild your credit over time. New credit cards may also become available to you after bankruptcy, particularly those designed for individuals rebuilding their credit.

Conclusion: Declaring bankruptcy is a significant decision that closes the chapter on your current credit card debts in New Jersey. Understanding the implications of both Chapter 7 and Chapter 13 bankruptcy can help you navigate the process more effectively. By focusing on rebuilding your credit after bankruptcy, you can take steps towards a healthier financial future.