When you are overwhelmed by debt, there are a lot of benefits to declaring bankruptcy. Not only does bankruptcy provide a temporary respite from your creditors, but it can also result in the elimination of many of your debts. Unfortunately, a major downside of filing for bankruptcy is the effect it will have on your ability to obtain credit after your bankruptcy discharges.
While you are prevented from applying for new credit cards during the course of your bankruptcy, you are free to seek out new credit once your bankruptcy discharges. But that does not mean getting a credit card will be easy. Most traditional lenders will be wary of extending credit to someone that was recently in bankruptcy. While traditional credit cards may not be an option, you may still have access to credit through secured credit cards.
Secured Credit Cards
In many ways, a secured credit card operates like a standard credit card. It is a revolving credit account with a set limit. If the card is not paid off immediately, it will accrue interest at a high rate. And in many cases, there are costs and fees associated with using the card.
The major difference between secured and traditional credit cards is that debt from a secured card is not dischargeable in bankruptcy. While there is no asset that is held in security for a credit card the way a mortgage note is tied to a home, secured credit cards are nevertheless preferred by lenders when it comes to high-risk borrowers. Instead, secured credit cards require a deposit before using.
In some cases, your credit limit is then limited to the amount you deposit at. Other lenders will set your balance at a multiple of the amount you deposited. In the case of default, your lender will seize your deposit to repay your debt. If there is any debt left over after the deposit is applied, it will be treated as unsecured debt similar to a standard credit card.
Popularity of Secured Credit Cards
It is common for most lenders to offer some sort of secured credit card. However, there is a belief that these cards may be falling out of favor with some financial institutions. According to the director of national priorities with non-profit Consumer Action, many banks are moving away from secured credit cards. In their place, these lenders are turning towards traditional unsecured cards with low limits as well as high rates and fees. Despite this trend, secured credit cards remain the best opportunity for many recently-discharged bankruptcy filers to obtain credit.
Discuss Your Credit Options with a Nevada Bankruptcy Lawyer
The best way to learn how a bankruptcy filing will affect your ability access credit is by discussing it with an experienced Nevada bankruptcy attorney. When you work with the bankruptcy lawyers with Vohwinkel Law, you will have your questions answered by attorneys dedicated to helping you achieve a fresh financial start. To learn more, contact Vohwinkel Law today to schedule your free consultation.