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Will credit cards with a zero balance survive my bankruptcy?

No balance credit cards likely to be closed after bankruptcy

Many people may think that if a zero balance exists on a credit card, it doesn't have to be included in a bankruptcy filing. Moreover, they believe the account will survive the court action and be available for use once the U.S. Bankruptcy Court discharges their debts.

That thinking is incorrect on both counts. Many attorneys will have their clients ere on the side of caution and list all open credit, whether there is a balance or not, to avoid the appearance of misleading the court.

Accounts with no balance are just as likely to be closed by lenders after the bankruptcy is completed, according to the Golden Law Group in Florida. Companies routinely review credit reports on their customers and will see when a bankruptcy has been listed. As a black mark on someone's credit worthiness, the court action is likely to be seen as reason enough to cancel an account, even if it wasn't delinquent in the case. In particular, Chapter 13 filers are required to make monthly payments to creditors over several years and cannot have credit or loans over $500 without court permission.

The credit card trail

Regardless of the balance, a credit limit is the potential amount of debt that cardholders have available to them at any time. From a creditor's point of view, that amount is viewed as a potential delinquency once bankruptcy is listed on someone's credit report.

However, United States Courts contends that bankruptcy should be viewed as a "fresh start." Some legal experts note that the best place to begin restoring a tarnished financial reputation is to obtain a new credit card, often one that is "secured" by a deposit from the cardholder that determines the amount of credit available.

Those who are emerging from bankruptcy should keep in mind the related nature of lending companies to avoid dealing with those whose debts they have just had discharged in court. Most credit cards are issued by major banks, not just under the bank's name, but on behalf of department stores, specialty shops and gasoline dealers. Since bankruptcies are a matter of public record, lenders frequently match court records against their own data.

In such cases, a zero balance on a card listed in a bankruptcy doesn't carry much weight. Starting with a new lender could lead to the fresh start envisioned by the court.

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