Applying for a Credit Card during Chapter 13 Bankruptcy


Fortunately, if you find yourself in trouble with too much debt, you have the ability to file for bankruptcy. However, when offered this type of debt relief, you should not consider it an easy way to “rack up debt” and have it eliminated. Abuse or fraud is not tolerated. If you hire a bankruptcy attorney, you should not apply for a credit card during that process. In Section 526 and 528 of the Federal Bankruptcy Law, it states that your “debt relief agency” is not supposed to suggest to you that you should apply for any more credit.

Bankruptcy Payment Plan

A stipulation in Chapter 13 bankruptcy law states that you, as a debtor, are not allowed to increase any debt without receiving the permission of your bankruptcy trustee. If you do apply for a credit card, your bankruptcy payment plan will be canceled and the bankruptcy proceedings will be stopped. Your trustee views Chapter 13 bankruptcy as a serious matter and expects the same from you as a debtor. Bankruptcy courts and trustees will not tolerate abuse of bankruptcy laws relating to state or federal government guidelines. In fact, if you attempt to abuse the law, you may face litigation if regulators perceive an intention for fraud. If this were to occur, you may find yourself in front of a district attorney.

Credit Card Provisions

You as a debtor have the right to retain your credit cards. However, to comply with bankruptcy law, you are not allowed to use them unless you receive permission from your trustee. In this type of situation, a “Motion to Incur Additional Debt” would need to be filed and a fee paid. For this to occur, you would need to be interviewed by your trustee regarding the reasons why additional credit card debt is required. Your trustee can either deny or grant your request for additional credit.

Granting Additional Credit

If this is granted by the trustee, there will be an impact on your bankruptcy payment plan. These type of plans are set for three years and can go up to five years. Allowing additional debt to be accumulated would require the plan to be changed. There would need to be sufficient reasons for making this revision. This would create more work for the court as well as an increase in cost. Due to the difficulty of making a revision, in most cases, your trustee will not allow you to acquire new credit cards. The only scenario that might allow this would be if you have an extremely low credit level, which is paid off every month.

Credit Card Use

Bankruptcy law states that credit card use must be requested every time you want to use one of your cards. This puts a burden on your trustee. It’s easy to assume that an experienced trustee may decide to suspend a portion or your entire payment plan for a short period of time so that you can get through your emergency. After it’s been resolved, you could get back on track with the payment plan.