Many people who complete a personal bankruptcy filing feel anxious about taking on additional debts. They do not want to risk accruing more financial obligations than they can pay, and an aversion to new lines of credit is relatively common among recent bankruptcy filers. However, secured lines of credit can be invaluable for those trying to establish a history of responsible credit use. These tools can also improve former debtors’ credit scores after a bankruptcy discharge, and they can help consumers enjoy their newly restored financial freedom in a responsible manner.
Most revolving lines of credit, including credit cards, become inaccessible once a filer submits their initial bankruptcy paperwork to the court. Financial institutions typically stop account benefits when there is a bankruptcy case pending. This is done to limit the amount that might eventually be discharged and prevent fraudulent charges from individuals who do not intend to pay what they owe.
The bankruptcy process generally culminates in the discharge of the outstanding balance on open lines of credit and the permanent closure of those accounts. Unfortunately, managing daily life without financial flexibility can be more difficult than people initially realize as they prepare for or navigate the bankruptcy process. Unexpected expenses and sudden budget shortfalls caused by work absences and other factors can leave people scrambling to pay bills on time or cover emergencies.
Secured credit cards are often the first credit opportunity extended to those who have completed a personal bankruptcy. Lenders frequently send solicitation letters within weeks of a filer’s discharge. These accounts require a deposit that is equivalent to the line of credit offered. The cardholder still makes monthly payments on their bill, but the deposit is there to protect the lender in the event of a default.
Within a year or two, a record of properly using secured credit cards can lead to larger credit offers with more favorable terms. Filers can open additional lines of credit with better interest rates and more overall credit available. Eventually, their history of on-time payments may help them qualify for car loans, mortgages and other sizable loans.
If you’ve filed for bankruptcy, a secured credit card offers an opportunity to demonstrate responsible financial behavior. This can improve your credit score and lead to more favorable treatment from lenders, landlords and even employers. Those concerned about rebuilding their lives after bankruptcy should speak with a qualified attorney to discuss a comprehensive strategy based on their specific circumstances.
Jeff Field & Associates has years of experience helping people across Georgia take control of their finances, discharge unsustainable debt and rebuild their lives after bankruptcy. Please call 404-381-1278 or contact us online for a free consultation on what life might be like for you after completing the legal debt relief process. We have offices located in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Decatur.