If you have accumulated a lot of credit card debt and you’re seriously considering filing Chapter 7 or Chapter 13 bankruptcy, you may be thinking that you’re going to swear off credit cards forever. You may even be thinking, “For here on out, I’m only using cash” or “I will never touch another credit card again!”
Much like the way an alcoholic swears they’ll never drink another drop of alcohol, or the way someone who lost a lot of weight may swear off dessert, debtors will often think the only solution is to give up credit cards for good. But is this really the best solution? Is it something a bankruptcy attorney would recommend to their closest friends and family who got into too much debt?
Why Credit Cards Are a Must
We’ll tell you right now that credit cards are a necessary evil, and if you ever needed them, you’ll need them after bankruptcy more than ever before. This is why: Credit cards are essential in helping you rebuild your credit. And it is vital to rebuild your credit after bankruptcy. You may think that you can live on a cash basis, but in reality, if you don’t rebuild your credit score, life is going to be much harder.
Here’s how a good FICO score helps you:
- It makes renting an apartment or house much easier.
- It makes getting an auto loan much easier.
- It ensures you get competitive interest rates.
- It makes getting a mortgage much easier.
- It’s less embarrassing if you get engaged to someone with good credit.
- You spend a lot less time at an auto dealership when buying or leasing a new car.
- It can help you get financing for your child’s braces.
- You skip the embarrassment of groveling for a loan or a line of credit.
- You save a TON on interest!
If you’re like most people, eventually you’ll need that auto loan or you’ll want to buy a house or refinance your mortgage so you can make some repairs or renovate the house. When you have good credit, it makes it much easier to get credit or a loan and you can save thousands by getting good interest rates.
After you file bankruptcy, credit cards are your new best friend. You NEED them to start rebuilding your credit score and showing lenders that you’re a trustworthy borrower who pays their debts on time.
Of course, you don’t want to abuse them. Our advice is to shop for competitive offers online with zero annual fees. When you do use your cards, charge no more than 10% and pay them off on time, and in full each month. If you pay all of your bills on time and use your credit cards wisely, you could have a credit score in the 700s within two to three years after you file for bankruptcy relief – now doesn’t that sound appealing?