Filing for personal bankruptcy is a decision that individuals generally make out of absolute necessity. Perhaps they have lost their job and have started falling behind on their monthly obligations. Maybe they have a health issue that leaves them unable to work and worried about major medical bills that continually accrue.
When people decide that they need to take assertive action to deal with personal debt, bankruptcy can very well be the solution they select. Personal bankruptcy can put a halt to stressful collection efforts and lead to the discharge of what remains on certain unsecured debts at the end of the process. There are some drawbacks to filing for bankruptcy, however, including a major drop in one’s credit score. People may also worry about what personal bankruptcy will mean for their credit cards.
Lenders typically close accounts
Any amount owed on a revolving line of credit will typically be an unsecured debt that may be eligible for discharge in the bankruptcy proceedings. To avoid any additional losses, credit card lenders and other parties that provide revolving lines of credit typically close those accounts as soon as they learn about the bankruptcy. Usually, they will know about it the same day that someone files paperwork with the courts. Most people will not have access to revolving lines of credit again until after the resolution of their bankruptcy filing. However, they can look forward to discharging the outstanding balance on those accounts if they are successful.
New opportunities will soon arise
Credit cards are often among the first forms of credit people qualify for after a bankruptcy discharge. Some credit card companies may even start soliciting those who have recently filed for bankruptcy just a few months after they complete the process. Although those early offers may have high interest rates or require security deposits, they can be important tools for individuals hoping to rebuild their credit. Eventually, those who discharged debts previously in a bankruptcy will be eligible for better credit cards.
The record of a filer’s bankruptcy will eventually come off of their credit reports, which will open up many more credit opportunities. When people understand what will happen with their revolving lines of credit, they can more effectively plan for the bankruptcy process. Understanding what bankruptcy will mean for one’s personal finances and future may help people make a more informed decision about handling issues with debt generally as well.