Filing for bankruptcy can bring much-needed relief from overwhelming debt, but many people in Michigan wonder what happens to their credit cards once the process begins. Understanding how bankruptcy affects your credit accounts can help you prepare for the road ahead and make informed financial decisions.

At Don E. Burch P.C., we provide legal assistance to the Okemos public and help individuals navigate bankruptcy with clarity and confidence.

Credit Cards Are Typically Closed After Filing

Once you file for bankruptcy—whether under Chapter 7 or Chapter 13—your credit card accounts are usually closed. This happens even if the account has a zero balance. Credit card companies often take immediate action when they receive notice of your bankruptcy filing, freezing or terminating your

accounts to limit further risk.

In Chapter 7 bankruptcy, most unsecured debts, including credit card balances, are discharged. In Chapter 13 bankruptcy, you may repay a portion of your credit card debt through a structured repayment plan, but the accounts themselves are still typically closed.

Outstanding Balances May Be Discharged

One of the primary benefits of bankruptcy is the potential discharge of credit card debt. In Chapter 7 cases, qualifying credit card balances are often

eliminated entirely. This means you are no longer legally required to pay those debts.

In Chapter 13 cases, you may repay some of the debt over a three- to five-year plan. Any remaining eligible balance at the end of the plan may be discharged, depending on your case.

You May Lose Access to Rewards and Points

If you have accumulated rewards points, cashback, or travel miles on your credit cards, filing for bankruptcy may result in losing those benefits. Once the account is closed, any unused rewards are typically forfeited. It’s important to review your credit card terms before filing if you have significant rewards saved.

Secured Credit Cards May Be Treated Differently

If you have a secured credit card backed by a deposit, the treatment can vary. In some cases, you may be able to keep the card if you continue making payments and reaffirm the debt. However, many lenders still choose to close secured accounts during bankruptcy proceedings.

Rebuilding Credit After Bankruptcy

Although bankruptcy impacts your credit score, it also provides a fresh start. After your case is complete, you can begin rebuilding your credit by:

• Applying for a secured credit card
• Making on-time payments
• Keeping balances low
• Monitoring your credit report regularly

Over time, responsible financial behavior can help improve your creditworthiness.

What About Future Credit Card Applications?

After bankruptcy, you may still be able to qualify for new credit cards, although the terms may not be as favorable initially. Interest rates may be higher,

and credit limits may be lower. However, consistent, responsible use of credit can lead to better opportunities over time.

Legal Guidance Can Make a Difference

Bankruptcy law can be complex, and how your credit cards are handled depends on your specific financial situation. Working with a knowledgeable attorney can help ensure that your rights are protected and that you understand your options throughout the process.

At Don E. Burch P.C., we assist individuals in Okemos with evaluating their financial circumstances and pursuing the most appropriate path toward debt relief.