Credit Card Offers and Bankruptcy: Answers to Some Questions

Credit card offers are universally available and there are even many credit cards for people with bad credit. Alternatively for those who are patient there are also ways to rebuild credit and get your online credit card application for the better cards approved.

There's an ugly word with regards to credit, one that scares people and make them feel like failures. It's a word that nobody likes to hear, but everyone should really understand.

That word is bankruptcy.

We all know that bankruptcy can affect your ability to secure the best credit card offers or even obtain any good credit cards. It can single-handedly turn a good credit history into bad credit (although this is rare, as people with good credit histories don't usually need to file for bankruptcy) and prevent the person involved from getting any new credit card deals.

While everyone seems to know this, all of these ideas are at best abstract. The best way to deal with a fearful concept or idea is to dissect it in an attempt to understand it. Once you've accomplished that, the idea might be less fearful. Let's give that a try in this article.

There are three major types of bankruptcies and all of them will have a very large effect for up to the next decade on anything from already poor credit all the way up to even an excellent credit history. The different kinds of bankruptcies (at least as far as the law in the United States goes) are all named after the chapters in the bankruptcy code that define them. They have alternative names as well, and for disambiguation purposes those will be given where appropriate.

A Chapter 7 Bankruptcy

This kind of bankruptcy can also be called a "straight bankruptcy", a "normal bankruptcy" or a "liquidation bankruptcy", depending on the area of the world that you live in. In the United States, chapter 7 of the US bankruptcy code is the one that deals with liquidation.

A trustee will be charged with task of taking over all of your property and liquidating it to acquire money which will then be transferred in full over to all of your creditors. In the United States there are regional differences that can mean the difference in you losing everything and getting to keep some of your personal property and possessions. There are strict conditions that are taken into account for approval under a chapter 7 bankruptcy and people who have money available to repay their debts on a periodical basis (after considerations have been made for things like rent and food), no matter how small, are likely to be denied a chance at a chapter 7 bankruptcy.

A Chapter 13 Bankruptcy

This is sometimes referred to as a "wager earner bankruptcy", a "personal bankruptcy" or in the case of conversations with your friends it might even just be called "a bankruptcy". In the United States bankruptcy code, chapter 13 is the chapter that deals with individual income earners, hence the name "chapter 13 bankruptcy" being used in the States to signify this kind of a bankruptcy.

Staying specifically with the United States, there are certain stipulations that have been put in place by the Government to evaluate eligibility of individuals to obtain a chapter 13 bankruptcy. The first stipulation is that the individual must have unsecured debts of less than $269,250 or secured debts of less than $807,750. A small side note on this is that an individual and their spouse may combine debts to reach this level as well.

Under chapter 13 of the US bankruptcy code, individuals or couples can have their total debt reduced as long as they agree to a repayment plan. Most of the time this results in the filers getting to keep their property unless the case results in which they do not earn some kind of steady, regular income. The plan as well as the details are reviewed and approved by a court of law, who then appoints a trustee to collect payments from the filers and transfer them to the creditors. Strict following of the repayment plan is required and the only way to get out of the agreement is to finish paying it off.

A Chapter 11 Bankruptcy

This is nowhere near as complex as either a chapter 7 or chapter 13 bankruptcy.

The chapter 11 bankruptcy in the United States is intended for both businesses and individuals. Under chapter 11 of the bankruptcy code, businesses and individuals are allowed to change their financial position. Through its invocation, both have the ability to reorganize their situation by agreeing to a repayment plan with their credit card companies.

In all kinds of bankruptcies, it is probably advisable to file through a lawyer. However, this is only actually mandatory for businesses as individuals are not required to retain an attorney upon filing for bankruptcy.

A bankruptcy discharge is a piece of paper sanctioned by the court that absolves you of paying some of your debts. Under the bankruptcy code of the United States, creditors have no right to force you into paying any debts that a court has deemed discharged and any such abuse or force should be immediately reported to the authorities.

There are a few exceptions to discharges. A famous discharge exception that is frequently used as an example is one relating to a chapter 7 discharge. These discharges typically do not affect certain things including tax payments, child support and alimony, student loans, court awarded settlement debts and a few others. This is actually common sense if you think about it for a moment, especially in the case of things like alimony and child support, both of which would not be excused under a chapter 7 bankruptcy discharge.

There are a few things that could affect the status of a discharge. Concealing or deliberately falsifying records are illegal and could result in an outright discharge denial, leaving you right back where you started (and poorer for the court fees I might add). Additional actions that could result in a discharge denial include: destruction of property, destruction of records, false oaths and concealing property. To find out exactly how your discharge affects you, the best thing to do is to contact a lawyer.

Timeline of a bankruptcy is something that many people ask about, and they can hardly be blamed for that. A bankruptcy can single-handedly obliterate an individual's chances to secure many top credit card offers as well as destroy a new company's chance at securing good business credit card offers. While credit cards for bad credit do exist, most of them are bad credit card offers in comparison to all the best credit cards and hardly desirable to have for a long period of time (which can be illustrated by logging onto a website to compare credit cards for good and bad credit).

Bankruptcy cases can last anywhere from 2 months to 5 years, depending on the type and severity of each case. The first step in most cases is what is called a "341 meeting of creditors", which is a neutral mediated meeting arrangement for creditors to ask their debtor questions about their financial affairs (the debtor will be sworn in and is under oath during this meeting).

After that meeting, it is highly type-dependant as to how long a bankruptcy case can take. Chapter 7 cases with no assets to liquidate are the fastest, taking 2-3 months after the meeting. With assets to sell off, typically it can take another 1-2 months on top of that.

Chapter 11 and 13 cases last longer and because of the large amount of variance in debtor circumstances, it is difficult to pin down a useful average. You can count on them lasting at least 3 years however and maybe as many as 5 or 6 years.

In conclusion, always remember to do your research beforehand so that you know what you're getting into. As previously mentioned, bankruptcy can severely affect your ability to get great credit card deals as well as specialty agreements like gasoline credit card deals. The best credit cards are only going to be available to people with good credit, but don't let that dishearten you. Remember that many people have been there before you and many people will be there after you. You are not alone.

Allow yourself to learn about what you're getting into and you should be able to weather the storm of the bankruptcy with a reasonably low level of stress and owe less money because of it.