Pennsylvania Bankruptcy Law: What Happens to Your Credit Cards?

Pennsylvania bankruptcy law is designed to provide relief for individuals who are struggling with overwhelming debt. One common concern for those considering filing for bankruptcy is the impact it will have on their credit cards. Understanding how bankruptcy affects your credit cards is crucial for making informed decisions about your financial future.

When you file for bankruptcy in Pennsylvania, your credit cards are generally considered unsecured debts. This means they are not tied to a specific piece of property, unlike secured debts such as mortgages or car loans. In most cases, filing for bankruptcy can lead to the discharge of your credit card debts, meaning you are no longer required to repay them. However, the specifics can vary based on the type of bankruptcy you file.

There are two primary types of bankruptcy filings for individuals: Chapter 7 and Chapter 13. Each has different implications for your credit cards.

Chapter 7 Bankruptcy: This type of bankruptcy is often referred to as "liquidation bankruptcy." If you qualify, it allows for the discharge of most unsecured debts, including credit card debt, within a few months. After filing, an automatic stay goes into effect, which prevents creditors from pursuing collection activities. However, you should be aware that any credit cards you have will likely be closed once you file for bankruptcy, and the discharge will negatively impact your credit score.

Chapter 13 Bankruptcy: Also known as "reorganization bankruptcy," Chapter 13 allows individuals to repay some of their debts over a period of three to five years under a court-approved repayment plan. While credit card debts can still be included in the plan, they are treated differently than in Chapter 7. You may continue to keep your credit cards, but you must adhere to the repayment plan. However, any remaining balances on your credit cards that are not paid off during the plan may be discharged at the end of your bankruptcy case.

Regardless of the type of bankruptcy you choose, it’s important to note that filing for bankruptcy will have a significant impact on your credit score. A bankruptcy can remain on your credit report for up to 10 years, which makes it more challenging to obtain new credit cards in the future. Lenders may view you as a higher risk due to your recent bankruptcy filing.

After filing for bankruptcy, many people wonder if they can obtain new credit cards. It is possible, but rebuilding your credit will take time and effort. Secured credit cards, which require a cash deposit as collateral, are often easier to obtain and can help you establish a positive payment history.

In summary, Pennsylvania bankruptcy law offers avenues for discharging credit card debts, providing individuals a fresh start financially. However, the impact on your credit score and the status of your credit cards varies depending on whether you file under Chapter 7 or Chapter 13. To make the best decision for your financial circumstances, it may be beneficial to consult with a bankruptcy attorney who can guide you through the process and help you understand your options.