- 1 Can I get a credit card after filing bankruptcy?
- 2 Bankruptcy – Arkansas frequently asked questions
- 3 Can I Get An American Express Credit Card After Bankruptcy?
- 4 How to Get a Credit Card After Bankruptcy in Canada
- 4.1 Prepaid vs Secured Credit Cards
- 4.2 The Power of a Secured Credit Card
- 4.3 How a Secured Credit Card Works
- 4.4 The Wrong Way to Get a Secured Credit Card
- 4.5 Don’t Believe Everything You Hear From Bank & Other Employees in the Credit World
- 4.6 Why You Should Avoid Applying For Credit Too Often
- 4.7 Where can I get a good secured credit card in Canada?
- 4.8 Make sure you use, but don’t overuse your secured credit cards
Can I get a credit card after filing bankruptcy?
Yes, there are several options available. While technically not a credit card you may be able to use a bank or debit card to perform activities for which you normally would use a credit card. You also may be able to keep the credit card you already have if the creditor grants approval.
In addition, no law prohibits you from obtaining a credit card after you file a bankruptcy petition or receive a bankruptcy discharge. Whether you will be given a credit card depends upon the provider that issues the card for which you apply. Because a bankruptcy generally appears on your credit report for ten years, credit card providers will be able to take your bankruptcy into consideration when you apply for a card.
What you should know before you apply for a credit card?
Some companies are inclined to issue credit cards to applicants who recently obtained a bankruptcy discharge because they know those applicants will not be able to receive a new discharge in the near future. In fact, some companies research bankruptcy filings and solicit business from individuals who were recently granted a bankruptcy discharge. You should do some research, however, before you accept one of those offers.
Credit card companies that solicit customers who recently filed bankruptcy often charge very high interest rates or charge a high annual fee to maintain your account. The limit on the amount you can charge is often quite low compared to the annual fee that you must pay to keep the card. Even if the card offers a low introductory interest rate, it might provide for a drastic rate increase a few months after you start using it. Spend some time comparing credit card offers so that you understand the interest rate, the fees, and the debt limits that apply to each card.
To avoid high interest rates and high annual fees, you can ignore the offers you receive in the mail and instead apply for credit cards that offer reasonable terms. You can search online for websites that allow you to compare different credit cards. In many cases, when you find a card with attractive terms, you can apply online.
The credit card company might decline your application because of your bankruptcy, but it might agree to issue you a card with a low credit limit. Be careful not to apply for several cards at once, however, because each application will show up on your credit report and too many applications will result in a lowering of your credit score.
If you want a credit card and cannot find one with a reasonable interest rate, you can consider a secured credit card. A secured credit card requires you to deposit money into a saving account. Your credit limit will be set at a percentage of the amount you have on deposit.
If you do not make at least the minimum payment on your monthly bill, your credit card debt can be deducted from your savings account. While interest rates on secured credit cards are often lower than the rates on unsecured cards, some secured credit cards charge a high annual fee and/or a processing fee. Again, you should do some research and compare terms before you apply for a secured credit card.
Even a credit card with a high interest rate can be beneficial if it has no annual fee (or if the annual fee is reasonable) and if you use it wisely. Obtaining a credit card, whether secured or unsecured, is a useful way to rehabilitate your credit score. If you are able to obtain a credit card, make sure that you avoid incurring more charges than you can pay at the end of the month. By paying the card in full and on time each month, you not only avoid interest charges, you demonstrate your ability to use credit responsibly. Over time, that will translate into an improvement of your credit score.
Bankruptcy is complex and many answers depend upon your specific situation. If you still have questions you can schedule a free consultation with a bankruptcy attorney.
Bankruptcy – Arkansas frequently asked questions
Bankruptcy is a legal proceeding in which an individual who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. (see Arkansas Court Directory) Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.
2. What Can Bankruptcy Do for Me?
Bankruptcy may make it possible for you to:
- Eliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of debts. It is designed to give you a fresh financial start. (see bankruptcy – Arkansas exemptions)
- Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)
- Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
- Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
- Restore or prevent termination of utility service.
- Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
3. How can I get a copy of a bankruptcy filing?
The federal judiciary proves public access to federal appellate, district and bankruptcy court documents through Public Access to Court Electronic Records (PACER), an electronic public access service.
Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:
- Eliminate certain rights of “secured” creditors. A “secured” creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt
- Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, some student loans, court restitution orders, criminal fines, and some taxes. (see Arkansas Non-Dischargeable Debts)
- Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.- Discharge debts that arise after bankruptcy has been filed.
5. How often can I file bankruptcy?
You cannot receive a discharge in a Chapter 7 case if you received a discharge under a Chapter 7 case filed in the last eight years or a Chapter 13 filed in the last six years. You cannot receive a discharge in a Chapter 13 case if you received a discharge under a Chapter 7 case filed in the last four years or a Chapter 13 filed in the last two years. If didn’t received a discharge in the previous bankruptcy filing, depending on why this is the case, you can file and receive a discharge without any time restrictions.
6. What Different Types of Bankruptcy Should I Consider?
- There are four types of bankruptcy cases provided under the law:
- Chapter 7 is known as “straight” bankruptcy or “liquidation.” It requires a debtor to give up property which exceeds certain limits called “exemptions”, so the property can be sold to pay creditors.
- Chapter 11 , known as “reorganization”, is used by businesses and a few individual debtors whose debts are very large
- Chapter 12 is reserved for family farmers.
- Chapter 13 is called “debt adjustment”. It requires a debtor to file a plan to pay debts (or parts of debts) from current income.
Most people filing bankruptcy will want to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly. (see Arkansas Bankruptcy Law’s Chapter 7 or 13?)
7. Is Arkansas Chapter 7 (Straight Bankruptcy) Bankruptcy Right for Me?
In a bankruptcy case under chapter 7, you file a petition asking the court to discharge your debts. The basic idea in a chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for “exempt” property which the law allows you to keep. (see bankruptcy – Arkansas exemptions) In most cases, all of your property will be exempt. But property which is not exempt is sold, with the money distributed to creditors. If you want to keep property like a home or a car and are behind on the payments on a mortgage or car loan, a chapter 7 case probably will not be the right choice for you. That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt. (see Arkansas Chapter 7 Bankruptcy)
8. Is Arkansas Chapter 13 bankruptcy (Reorganization) Right for Me?
In a chapter 13 case you file a “plan” showing how you will pay off some of your past-due and current debts over three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property–especially your home and car–which might otherwise be lost, if you can make the payments which the bankruptcy law requires to be made to your creditors. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payment to get caught up on the amount you have fallen behind. You should consider filing a chapter 13 plan if you:
(1) own your home and are in danger of losing it because of money problems; (2) are behind on debt payments, but can catch up if given some time; (3) have valuable property which is not exempt, but you can afford to pay creditors from your income over time.
You will need to have enough income in chapter 13 to pay for your necessities and to keep up with the required payments as they come due. (see Arkansas Chapter 13 bankruptcy)
9. What Does It Cost to File for Bankruptcy?
It now costs $306 to file for bankruptcy under chapter 7 and $281 to file for bankruptcy under chapter 13, whether for one person or a married couple. The court may allow you to pay this filing fee in installments if you cannot pay all at once. If you hire an attorney you will also have to pay the attorney’s fees you agree to.
10. In Arkansas What Property Can I Keep?
In a chapter 7 case, you can keep all property which the law says is “exempt” from the claims of creditors. Arkansas exemptions provides list of the exemptions available for Arkansas. In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement. You also only need to look at your actual equity in any property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you count your exemptions against the $10,000 which is your equity if you sell it. While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind on payments. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy. (see Arkansas Chapter 7 Bankruptcy or Arkansas Chapter 13 Bankruptcy? and Arkansas Non-Dischargeable Debts)
11. What Will Happen to My Home and Car If I File Bankruptcy in Arkansas?
In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. (see Arkansas bankruptcy exemptions) Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13. However, some of your creditors may have a “security interest” in your home, automobile or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don’t make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case. There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.
12. Can I Own Anything After Bankruptcy?
Yes. Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after your bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt. You can also keep any property covered by Arkansas bankruptcy exemptions through the bankruptcy.
13. Will Bankruptcy Wipe Out All My Debts?
Yes, with some exceptions. Bankruptcy will not normally wipe out:
(1) money owed for child support or alimony, fines, and some taxes;(2) debts not listed on your bankruptcy petition;(3) loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;(4) debts resulting from “willful and malicious” harm;(5) student loans owed to a school or government body, except if:– the court decides that payment would be an undue hardship;(6) mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor). (see Arkansas Non-Dischargeable Debts)
14. Will I Have to Go to Court?
In most bankruptcy cases, you only have to go to a proceeding called the “meeting of creditors” to meet with the bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation. Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney. To find the location of the court that serves your area visit the Arkansas Federal Bankruptcy Court Directory page.
15. Will Bankruptcy Affect My Credit?
There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse. The fact that you’ve filed a bankruptcy can appear on your credit record for ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.
16. Can I Get a Credit Card After Bankruptcy?
Yes, there are several options available. While technically not a credit card you could use a bank or debit card to perform activities for which you normally would use a credit card. You also may be able to keep the credit card you already have if the creditor grants approval. If these options do not work you can get secured credit card which is backed by your own bank account.
17. Are Utility Services Affected?
Public utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills which arise after your bankruptcy is filed.
18. Can I Be Discriminated Against For Filing Bankruptcy?
No. 11 U.S.C. sec. 525 prohibits governmental units and private employers from discriminating against you because you filed a bankruptcy petition or because you failed to pay a dischargeable debt.
19. Can Bankruptcy Help Get My Arkansas Driver’s License Back?
If you lost your license solely because you couldn’t pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back.
If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.
21. I’m Married, Can I File by Myself?
Yes, but your spouse will still be liable for any joint debts. If you file together you will be able to double your exemptions. (see Arkansas bankruptcy exemptions) In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable then it might be advisable to have only one spouse file. If the spouses have joint debts, the fact that one spouse discharged the debt may show on the other spouses credit report.
22. Can filing bankruptcy stop bill collectors from calling?
Yes. The automatic stay prevents bill collectors from taking any action to collect debts.
23. How long after filing will the creditors stop calling?
Once a creditor or bill collector becomes aware of a filing for bankruptcy protection, it must immediately stop all collection efforts. After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. This usually takes a couple of weeks. Creditors will also stop calling if you inform them that you filed the bankruptcy petition, and supply them with your case number. In some cases, you or your attorney should contact the creditor immediately upon filing the bankruptcy petition, especially if a lawsuit is pending. If a creditor continues to use collection tactics once informed of the bankruptcy they may be liable for court sanctions and attorney fees for this conduct.
24. Can I erase my student loans by filing bankruptcy?
Generally, student loans are not discharged in bankruptcy. In 11 U.S.C. sec. 523(a)(8) there are two exceptions to this general rule:
- The student loan may be discharged if it is neither – Insured or guaranteed by a governmental unit, nor
– Made under any program funded in whole or in part by a governmental unit or nonprofit institution.
Student loans more than 7 years old used to be dischargeable under certain circumstances, but this provision was removed by an appropriations bill passed in October of 1998.
Whether an exception applies depends on the facts of the particular case and may also depend on local court decisions. Even if a student loan falls into one of the two exceptions, discharge of the loan may not be automatic. You may have to file an adversary proceeding in the bankruptcy court to obtain a court order declaring the debt discharged.
25. Where do I file if I haven’t lived in the same state or district for the last two years?
If you haven’t lived in your current state for 91 days you must wait until you have lived there for 91 days and then file in your current state. If you lived in your current state for more than 91 days but less than two years, you will file in your current state but use the exemptions from where you lived for majority of the 180 day period immediately previous to the 2 year period before you filed. If you bought your home within the last 40 months and/or haven’t lived in your current state for the last 2 years then your homestead exemption may be limited.
26. If I am going through a divorce how will my ex-spouse filing bankruptcy affect our divorce settlement?
Alimony, maintenance, and/or support are protected from discharge. Divorce decrees and separation agreements are covered by 11 U.S.C. Section 523(a)(15). This section states that these debts are not dischargeable unless:
(A) the debtor does not have the ability to pay such debt from income or property of the debtor not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor and, if the debtor is engaged in a business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business; or
(B) discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse, former spouse, or child of the debtor.
Can I Get a Credit Card After Filing Bankruptcy?
St. Louis Bankruptcy Attorney Tobias Licker About Credit After Filing for Bankruptcy:
For most people, bankruptcy is a last resort. Usually a series of financial problems begins as a slow downward spiral, and then the crisis accelerates to a point of desperation. You become so used to being told “no” when applying for credit that you assume you’ll never have credit again.
So many consumers are surprised when the credit card offers start rolling in as soon as the bankruptcy is finalized. And even though their debt has been discharged, they still have the mindset of desperation and eagerly grab any card that’s offered.
Can you get one or more credit cards after bankruptcy? For most people, the answer is “Yes!” However, a better question is “Should you get this particular credit card after bankruptcy?”
It’s important to remember that the credit card companies aren’t offering you a card because they kindly want to help you re-establish your credit. They’re making the offer because they plan to make a big profit from you. And the “bad credit card” system is set up for them to make money whether you pay the bill on time or not.
A not good option: the unsecured credit offers in the mail
Bankruptcy represents a fresh start with a clean slate. However, once your bankruptcy is finalized you no longer have the option to discharge debts in bankruptcy for eight years through a chapter 7 and 4 years through a chapter 13. So, post-bankruptcy creditors can aggressively pursue any delinquencies with tactics such as wage garnishment, interception of tax refunds (if the debt is for medical bills in Missouri), and even liens against bank accounts or property after they obtained a judgment.
Most “bad credit cards” offer low limits and high fees. For example, a typical card may have a $300 limit, with $250 in various fees assessed before the card is ever used. These assessments include processing fees, membership fees, handing fees, late fees, delinquency fees, and even fees for paying by phone. And if one of these fees is assessed on a date when you’re too close to your limit, they’ll charge a hefty over-limit fee as well. While these cards are technically “unsecured”, you’ll have to pay down the fees before you can use the card.
A better alternative: secured credit card
A secured card requires you to open a savings account which is then used as “security” for the charges on the card. The card’s limit is determined by the amount you deposit, and fees may be substantially lower. After using the car for some time and paying timely, your bank will often offer you another credit card option that is not secured and has a higher credit limit.
Should I get a new credit card at all?
Many financial experts advocate having no credit card debt. However, in the modern world, at least one credit card may be essential, especially if you need to purchase airline tickets or rent a car. Many clients wish to have a credit card for emergencies and to be able to buy groceries even when no income should be available. Even though some clients tell us that they do not wish to get into the credit mess again, we do recommend talking to their bank about getting a secured credit card. Even though the credit appears to be better after filing in many cases, the credit is still low and should be improved by using credit. As higher your credit scores goes as less interest you will have to pay on home mortgages and car loans. We recommend using a secured credit card up to 40% or 50% of the credit limit and then paying it off each month. We believe that this will establish good credit faster than keeping a balance each month.
Some cards are better than others. For example, most companies charge up to twenty percent or more APR on bad credit cards. But there is at least one major issuer that will reset the APR to nine percent any time the balance is paid in full. By paying the card in full every few months, you can save thousands of dollars in interest payments and give your credit score a real boost. You can compare credit cards online and even search for consumer reviews before choosing your card.
Once your bankruptcy is finalized you can get a credit card. Just make sure that the card meets your needs and will help you rebuild your credit rating under reasonable terms.
Can I Get An American Express Credit Card After Bankruptcy?
This is a recent email I got from Stu.
how difficult is it to get a new amex card after filing bankrupcy, I paid them in full before filing
Answer – Stu – to get to the bottom of this, I actually called American Express. The first person I spoke to was from customer service and she was not able to answer that. Then she transferred me to “new accounts” and this was the answer I got from them.
A bankruptcy stays on your credit report for potentially up to 10 years. As long as you have a bankruptcy record on your credit report, American Express will not approve the card. I then asked them if someone could put you as an authorized user on an Amex Card. The answer was it should not be a problem though he cannot be 100% certain about that.
So there you go, the short answer is no.
Correct, they will not give you a card if you filed for bankruptcy in the last 10 years. I just finished 3 hours of calls with them. This is true even with a high six figure annual income, plus 500k in THEIR savings account program.
I just got approved for a american express delta skylines card. I have a bk on my credit for the past 8 yrs
this is crazy but i just got approved for the delta sky miles amex card 2yrs after bankruptcy! 2 months ago i was also approved for cap1 venture card $10000 limit..a month before that i refinanced my car from 15.9% to 3.74% through my credit union oh and they also approved me for a credit card $1500 cl..there is a light after a bk just have to be humble and patient.
I think it’s czy thay AMEx wuld giv credit to some with bk on credit while denying others..
Bunch of crap! Amex wont approved if you have BK in your credit files!
Oh yes they will, I was approved for Amex 3 years after my BK. It’s crazy how some get approved and others don’t.
Wrong. BCE a year after 13 discharge. That’s basically 6 years from file date. I also was approved for the PRG and a card for my business.
Interesting that a “branded” amex card works…. I wonder if the same is true with branded Visa/Mastercards Anyone know if it is easier to get a branded unsecured card?
I had to put my 2 amex under chapter 7 4 years ago (2007) I never wanted to include them but my lawyer said I had to.
i spoke several time with their customer service and they told me that if I volunteerely pay them back they would accept another application from me and they would base their decision only on my actual credit report.
I have a great lawyer and I removed all negative items from my credit report 2 years after filing bankruptcy.
I pay amex the 4000$ i owed them and they re-issued me the card with no problems.
I spoke with Mrs. Boke at the time.
If she is still working at the Amex approval dept. she might be able to help you.
Keep this forum updated.
Hope this helps,
Did you also have your bankruptcy removed from your record after 2 years or did it stay for 10 years and then you got another AmEx after paying them back?
How is your lawyer?
We filed two cards with them chapter 7, 6 years ago. My mom tried to add me as an authorized user and it appears I’m completely blacklisted. I have a 6 figure income as well as credit score over 700 now. I had perfect credit at the time of filing and no late pays after so my score recovered quickly. I guess I’ve always wondered if after 10 years I’ll be able to pick up an AMEX or am I on a lifetime internal no-no list with them??
I filed Chpt. 7 bankruptcy in 1994 and AmEx was one of the creditors that was listed. So I owed them money that was erased due to bankruptcy. In 1995 my company wanted me to get a corporate AmEx card but I was turned down due to the bankruptcy, even tho the company was backing the card. In 2005 I applied for a branded Delta AmEx card and was given the card. Never tried again for a regular AmEx card.
I had a card in 1987 and filed bk. I offered to pay them back 10 years later and reapply. Each time they said I could pay them back but they could not guarantee they would issue a new account. My question is why bother? If you pay them even if they have been charged off and they won’t reissue a card…then you paid them when you didn’t have to and they got their money and you’re still out the card. I gave up 25 years later they still will not issue a card and my score was 780. they keep all your info in a database and if you read the card agreement it tells you if you have “ever” had a bad account they will never reissue you a card.
american express is a rip-off…other cards are better….
I don’t think you should be eager to apply for another AMEX until your bankruptcy 7 has passed 10 years AND successfully removed the bankruptcy information about your past AMEX card on your credit report or you are just adding more inquiry to your credit report which equals reduction in your credit score! I have 2 years to go even though, my girlfriend has added me to her platinum card for past 7 years, I am waiting because, my credit record is spotless and do not want to add anymore inquiry which will stay on your credit report for 2 years. More you apply for credit, more you will lose points on your score! That is any type of credit. By the way, I had Centurion Black Card so, I have to show not a single inquiry or blemish of any kind on my credit report.
by the way an inquiry does not stay on for 2 years
Experian keeps your inquiries for 2 years. Equifax and Transunion only 1 year.
I started with credit when I was 16 with one of those Capital One highschool cards for students and years later I ended up with a green card and a blue from amex with a line of $31,900. My credit score was 715 back then… They wanted income verification from me and I already owed $16,000 on that card and I said I don’t want bothered with the hassle. So Chase picked up their business back in 2008 with a $20,000 credit limit increase and transfered the entire balance..Then a few months later my business went under and I got stuck with $100,000 in personal and business debt and had to do a chapter 7 bankruptcyabout 3 years ago… Now here I am my Fico is at 670 and it will be mid 700’s by 16 months from now even though I have a bankruptcy because I have tons of paid as agreed accounts over 11 years.. over 50. But the point being I never filed bankruptcy on Amex and I applied several times and they decline me just for bankruptcy.. I even tried to get an exception by a supervisor but it didn’t happen so I just gave up and the truth is you’ll NEVER have a American Express card with a bankruptcy on record expecially how these banks are today… I filed on Chase $27,000 and I called them and they said they will overlook that and once they see more payment historyon my 11 accounts I could get approved for a Chase Freedom Card even with a bankruptcy… I thought I would of been black listed.. Chase is a good bank but I really like american express
How to Get a Credit Card After Bankruptcy in Canada
July 27, 2010 by admin
Anyone who has been discharged from a bankruptcy in Canada will not have any credit cards. That’s because all credit cards had to be surrendered when filing for the bankruptcy – even if they had a zero balance. Believe it or not, there really are some places that want to give you a credit card, even if you just got discharged from your bankruptcy yesterday. But first, let me tell you a little story.
The day I had to give up my credit cards, I felt helpless without them. I’m not talking about whipping out a Visa card to pay for a meal or a tank of gas for you car. You can use cash for that. There are certain bills that can only be paid by a credit card. I found that out in September 2007 when I filed for bankruptcy and had to surrender all of my credit cards. My home phone service was, and still is with Vonage Canada. I love it, but they only take credit cards for payment. I had to get a friend to pay for me with her card and I paid her back in cash. I couldn’t even rent a carpet cleaning machine at Home Depot since they required a credit card to preauthorize a deposit, and they didn’t accept cash. And forget about renting a car or shopping online.
Prepaid vs Secured Credit Cards
I thought I had found the solution. A prepaid credit card. Money Mart (called Insta-Cheques in Quebec) offers the Titanium Plus prepaid MasterCard. You simply go to the local Money Mart or Insta-Cheques store and give them some cash to put on it, plus a bit extra for a set up fee when you first open it. Then, if you give them $150, your card has a $150 limit. Next week you put $500 on it, and that’s your new limit. Kind of like a bank debit card linked to a bank account, but its got a MasterCard logo on it and it’s treated just like a real credit card in most cases. You simply pay an activation fee, a monthly fee and lots of other fees. But hey, who’s complaining? When you think that’s your only option, you take what you can get, right? I was “back in the game” – or so I thought.
After cheerfully using that prepaid MasterCard for a year, I discovered that my credit score and profile were not all that good. Of course, being just one year past my bankruptcy discharge didn’t help. This was mid-2009 and the credit guidelines had tightened up everywhere in Canada and there was no sign of them getting any easier. I thought (and secretly hoped) that my prepaid Titanium MasterCard had been reporting to Equifax and TransUnion Canada credit bureaus. But I knew in the back of my mind that this card was just a bit too easy to get and probably didn’t report to the credit bureaus. I was right. Life after bankruptcy in Canada is a bit rough, especially right after you’re discharged from a bankruptcy. Anything worth having takes a bit of effort. You can’t expect it to be as easy as for everyone else who didn’t have the luxury of being able to walk away from their debts.
So much for a fresh financial start, eh? I discovered that with the ever more strict credit requirements that nobody was going to extend credit to me until a bit more time had passed from by bankruptcy discharge and until I had at least one year of re-established credit. But how was I supposed to have one year of re-established credit if nobody would extend credit to me?
The answer was a SECURED credit card. One where I had to send in a minimum $500 deposit to get a $500 line of “credit.” With secured credit cards in Canada, the deposit is refunded in full with interest when you close the account, but cannot be used to pay down your monthly balance. But the good part is that a true secured credit card will report to the credit bureaus. Virtually everyone is approved, but you must be discharged from your bankruptcy. As long as you’re making timely payments of at least the minimum balance or more, your credit report improves and your credit score goes up. I had to save up for a little while to be able to part with $500, but knowing how important this was and how beneficial it would be, I did it.
The Power of a Secured Credit Card
The major benefit of a secured credit card is that it will report to the credit bureaus and, providing you’re making your monthly payments on time, will help improve your credit report and credit score. Of course, if you miss payments, that will also report to the credit bureaus and work against you – more than for a someone who doesn’t have a past bankruptcy. A prepaid card will not report to any credit bureaus because there’s no “due date” for payments. When you use up the money on the card, you just add more when you get a chance. That’s not a real credit card and that’s not the way credit works in the real world. If you’re serious about your credit and want to get ahead, you’ll want a secured credit card.
Is this starting to make sense now? I hope so. Don’t worry if this sounds new and confusing. Many people do not know the difference between a prepaid and a secured credit card. Just because there’s a Visa or MasterCard logo on it, doesn’t mean they’re all the same. You may need to educate your friends, family and even businesspeople! You will be truly surprised at how little the majority of Canadians know about the way credit works.
By now, you should definitely see the value in having a secured credit card. If you’re recovering from a bankruptcy, and you want to live in today’s modern, credit-driven society, you need a secured credit card.
How a Secured Credit Card Works
A secured credit card company will require you to send them a cheque or money order of at least $500 (depending on the company) along with an application form. Once approved, you will receive your credit card in the mail. There are some set up fees and monthly service fees, and a moderate to high interest rate on balances, but those are charged directly to your new credit card. You can then use your new secured credit card as you would a normal credit card. When the bill comes in, you pay the balance, or at least the minimum payment. That gets reported to the credit bureau and will help rebuild your credit profile and increase your credit score – just as if you had been using a regular unsecured credit card! Of course, if you are late or miss payment, that also gets reported to the credit bureaus and hurts your chances of recovery.
Unlike a conventional unsecured credit card, you won’t get automatic credit limit increases. If you would like a higher credit limit, you need to send in more money to increase your deposit – usually in one hundred dollar increments. Depending on the company, secured credit cards cannot turn into unsecured credit cards. With People’s Trust MasterCard, the one I have, you can close your secured card and get your deposit back after your last monthly bill is paid in full, but you won’t ever be able to get it converted to an unsecured credit card. If you want an unsecured credit card, you’ll need to wait until your credit is strong enough to qualify for an unsecured card. With the trends in the credit world in Canada these days, many card issuers won’t even consider you for an unsecured card until the bankruptcy is no longer reporting on your credit report – that’s six years from the day you were discharged. Other card issuers may consider you after two to three years of new, re-established credit after your discharge from bankruptcy.
The Wrong Way to Get a Secured Credit Card
Now that you know the value of a secured credit card, you want to know how to obtain one, right? Good. Although some banks may offer secured credit cards, I suggest you stay away from them.
Let me tell you a quick story. In the summer of 2009, when I realized I needed to stop using a prepaid MasterCard and get a secured credit card, I went into my home branch of both banks I dealt with: ScotiaBank and TD Canada Trust. I couldn’t get anywhere with ScotiaBank. They wouldn’t give me an appointment or return my phone calls when they knew I had a recent bankruptcy. Finally after phoning the credit department for ScotiaBank Visa and speaking to a supervisor, I found out ScotiaBank will not extend any credit – even a secured credit card – to anyone with a bankruptcy appearing on his or her credit report.
Then I tried TD Canada Trust and actually felt quite confident I’d be getting a secured Visa credit card from them. The lady I spoke with seemed very knowledgeable and said everything with such conviction that I truly believed her. However, that soon turned to disappointment when I found that my application for a secured credit card was declined. Both the bank representative and I discovered that TD Canada Trust will not approve anyone for a secured credit until at least three years after the bankruptcy had been discharged. This, after fully disclosing all the details to her, including the fact that my bankruptcy had been discharged only 13 months prior. To add insult to injury, I got a new credit inquiry on my credit report, which lowered my score, as any credit inquiry will do. And it will stay on my credit report for three years. Of course, the fact that I had included a TD Visa card with about $450 on it in my bankruptcy didn’t help. Don’t let your case be a learning experience for a new employee.
Don’t Believe Everything You Hear From Bank & Other Employees in the Credit World
Some employees don’t like to look stupid, so if they don’t know an answer, they make it up as long as it sounds logical. Or worse yet, they state opinion as fact. They’ll sound believable because they are the person in authority that you are looking up to. Unless you can get something in writing, don’t believe it. Just ask them to put it in writing and you’ll see them back peddle! As the saying goes, “trust, but verify.” If you can’t get the answer you want, keep asking different people until you get the same answer at least three times. You will encounter other employees who don’t want to risk giving a wrong answer. Either because they truly don’t know, or because they’d rather play it safe, they’ll tell you there is absolutely no way to guarantee you that you’ll be approved. You just need to apply and then you’ll find out. Of course I wouldn’t expect anyone to give me a 100% guarantee that I’ll be approved without doing a credit inquiry. But some people don’t realize, or care, that credit inquiries lower your score and stay there for three years. I just tell them that I will only apply if it seems fairly certain that I would be approved.
Unless it’s clearly stated on the application form or the company’s website that people with a discharged bankruptcy appearing on their credit reports – regardless of how long ago it was – are welcome to apply for their secured credit card, don’t apply. Some will outright say that they don’t approve any applications with a bankruptcy appearing on the applicant’s credit report, so there’s no point in applying and getting the resulting credit inquiry. A few employees have told me that their company will accept all applications. Of course they will accept all applications, but if you know for sure, or have a very strong suspicion that it will be rejected if your bankruptcy still shows on your credit report, then there’s no point in applying.
Why You Should Avoid Applying For Credit Too Often
There IS harm in applying “just to find out.” Each credit inquiry lowers your credit score by a few points, and you can’t afford to lose any points right now. Plus, the more you apply, the worse it makes you look. You’ll be seen as a “credit seeker” and if nothing else, declined for too many credit application inquires.
Who knew it could be so hard to get a secured credit card? The bank gets to hold your money as collateral, which greatly minimizes their risk. Go figure! I actually got a somewhat reasonable explanation from a Royal Bank representative in the card services department. Apparently, at least with RBC, part of the risk is assumed by them and part of it by Visa. It seems that they actually still have some risk in the even of a card holder defaulting, since they don’t get all of the security deposit. Unless the credit guidelines change (which probably won’t be for a long time, if ever), you’ll need to go elsewhere for your secured credit cards.
Where can I get a good secured credit card in Canada?
Two secured credit cards came highly recommended to me: People’s Trust MasterCard (formerly known as Horizon Plus MasterCard) and Home Trust Visa. I was very excited when I read on their websites that virtually everyone is approved. As long as you are 18 or older and be discharged from your bankruptcy (if applicable), plus a few other logical requirements, your chances of approval are excellent. You just need to print the application form from their websites and mail it in with your deposit. Your deposit becomes your credit limit. It cannot be decreased. It can be increased anytime in the future by simply sending in more money to add to the deposit.
Unfortunately, Home Trust Visa is not available to residents of Quebec, so I had to pass on that one. But I did apply for and receive a People’s Trust MasterCard. I’ve been using and paying it ever since. It’s been reporting to my Equifax and TransUnion credit reports for a year already which has greatly helped to strengthen my credit. It would have been nice to have two lines of credit reporting to my credit reports, but one is better than nothing. If you are able to get two secured cards, go for it. Later, when you apply for other credit, like a mortgage or car loan, some lenders like to see more than just one line of re-established credit.
People’s Trust MasterCard required a personal cheque with my full name and current address, so I had to order new cheques. They hold the funds until they clear, although a certified cheque does help speed up the process. I began with their minimum deposit of $500. A few months later, I saved up and sent another $500 to increase my credit limit. Today, a $500 limit does not look very realistic and is easy to max out, which also lowers your credit scores. That’s why I wanted to increase it to $1000. In fact, I want to increase it to $2500. Firstly, it’s forced savings. Second, it isn’t too high of a credit limit to work against me. At a certain point, you can get a limit that is too high. If your income is low and you have a large amount of available credit, many lenders get nervous. The theory being you could go and max out your credit cards which would result in a very high debt to income ratio. But that’s a story for another time.
There are other companies out there offering secured credit cards for Canadians, however People’s Trust MasterCard and Home Trust Visa continually get good reviews and they look good on your credit report. Other cards, especially if from a high interest finance company, may not work in your favour. I have personally used my People’s Trust MasterCard for a year already and would highly recommend it to anyone recovering from a bankruptcy in Canada. I’m not sure how good the success level is with any of the other secured credit cards out there today so I don’t want to recommend them at this time.
Make sure you use, but don’t overuse your secured credit cards
To gain any benefit from secured credit cards, or any credit cards for that matter, you need to actually use them. The optimal way to do this would be to charge a small amount, wait for the monthly statement and then pay on or preferably before the due date. This way, it will demonstrate that you can handle your credit responsibly.
Make sure not to charge too much. Although some experts will say to charge no more than 5% of your available balance, a commonly acceptable amount is 20% to 30%. Some would even suggest up to 50% but that’s getting a bit too high. So now you’re probably asking, “does this mean if I send in a $1000 deposit, I should not have a balance of any more than $200 or $300 at any given time?” YES! That’s exactly right. There’s nothing worse than charging $950 on a card with a $1000 limit. Or worse yet, maxing it out and making it go over the limit with the interest charges. This will report to the credit bureaus and lower your score because it looks like you’re short on cash or in financial trouble – especially if it’s like that every month.
OK, so how about paying the balance before the bill even comes in? Let’s say you know exactly how much was charged and you go online to pay that amount as soon as you get home. Bad idea. For one, until the transaction gets posted – which can take up to 10 days – your payment will not be applied since you are typically not allowed to overpay your secured credit card. Perhaps it’s because that would be a loophole to increase your credit limit. Not only that, your credit report and credit score wouldn’t benefit. If you pay any amount before the statement is printed, it will report to the credit bureau that you have a zero balance. It will look like you aren’t using your credit card and that won’t build up any payment history. You need to let a small balance report to the credit bureau and then pay it. You can pay it the day you get your statement, just not any sooner.
Remember not to charge more than 20% to 30% of your available credit limit. Charge your cell phone bill, Internet bill or hydro bill to your secured card. In fact, set up automatic payments so that you never have to worry about late payments again! If you don’t have any bills to charge to your secured credit card, use it to pay for gas for your car or routine purchases.
On a final note, I noticed on my TransUnion credit report that there is a neat little graph showing my usage of my available credit from month to month. That means if I can see it, so can lenders and card issuers. If you find that your credit limit is too low, save up and send some more money to increase your deposit. You probably won’t hear this from anyone else, especially if you are recently discharged from a bankruptcy, but “Happy spending! Just charge it!” (responsibly of course). And don’t delay. The sooner you start using a secured credit card the – right way – the sooner your credit will improve.