The story is not as uncommon in New York as you might think. A New York debtor files a Chapter 7 bankruptcy. Then, mere months after obtaining a discharge, the banks start aggressively sending out letters offering new credit cards with low rates and high credit limits. This doesn’t make any sense at all. Why would banks be excited to extend credit to people who file bankruptcy? Aren’t people who file bankruptcy credit risks?
The latter, of course, is not true. People who have filed bankruptcy are rarely credit risks in the long run. Quite the contrary, in many cases people’s credit ratings improve after they file bankruptcy, which may be why they’re offering credit cards. Of course, your bank won’t tell you that before you file, hoping you believe bankruptcy is an act of financial irresponsibility rather than the opposite. Remember, people who file bankruptcy are not passively sitting and watching unpayable bills pile up. They’re taking the initiative to fix their problems, and getting their finances in order signals to creditors that they are responsible. The improvement in post-bankruptcy credit ratings demonstrates that.
Another reason banks start selling people credit cards after they’ve filed a Chapter 7 bankruptcy is that after a discharge, they’re barred from filing again for seven years. If you can’t file bankruptcy again for seven years, that’s seven years of debt that you can’t escape. Banks may believe that you have poor spending habits, and that you’ll take on more than you can afford. Your discharge gives them a golden opportunity to try again. The fresh start bankruptcy gives you gives creditors a fresh start too.
More likely than not, it’s the seven years of bankruptcy-proof debt rather than your improved credit rating that causes banks to offer credit cards after bankruptcy. That’s not to say that people should not discount the benefit of better credit bankruptcy gives them, but banks only care about their own bottom line, so watch out for yours.
For more questions about credit cards, credit history and effective strategies for dealing with debt, please feel free to contact experienced Brooklyn Bankruptcy Law Firm Bruce Weiner for a free initial consultation.
