Confused... thought I was allowed to rebuild with a credit card during 13

[sm23]

I'm so upset. I got a credit card about a year ago, thinking it was ok to rebuild. Clearly, it is not. I read it in my handbook just now. I was trying to increase my credit score! I had read a guide about rebuilding after bankruptcy that must have been aimed at Ch 7 participants. What should I do? Contact my lawyer? Cancel it? Both? I have been so good about budgeting and not going crazy.. no debt has felt amazing and I really hope I didn't throw it all away. I have saved up a modest emergency fund and don't need the credit card at all, but I'm afraid the damage is already done since it shows up on my credit report.

Will my case be dismissed? Please advise!

[malf1204]

having a credit card and using it responsibly will not hurt your credit score only improve it. Having a positive payment history after filing does help your credit score just do not miss any payments or keep a high balance.

[sm23]

Thank you for the reply. I understand that part of it. The part I didn't understand (or just plain forgot!!) was that NEW accounts need written approval from the trustee.

[LadyInTheRed]

My handbook says I can't incur debt without approval by the trustee. As long as you haven't used the credit card, you aren't incurring debt. If you did use it, get it paid off and don't use it again.

[AngelinaCatHub]

Thank you for the reply. I understand that part of it. The part I didn't understand (or just plain forgot!!) was that NEW accounts need written approval from the trustee.

You are not allowed to accrue new debt in BK without approval. However, don't panic. Pay it to zero, do not close it. Just leave it be. Once a year, make a small purchase and pay it off. This will keep it open and not be reported to Credit.

In the EVENT a complaint is made, and I doubt it would be, a simple explanation as you just made in your post, would suffice. Particularly with a zero balance. Worry time is over now so "Live long and prosper". 'Hub

[AngelinaCatHub]

My handbook says I can't incur debt without approval by the trustee. As long as you haven't used the credit card, you aren't incurring debt. If you did use it, get it paid off and don't use it again.

Thanks L in R. You beat me by two minutes. LOL. 'Hub

[sm23]

Oh nice catch. My handbook has a separate paragraph about 'obtaining credit without written consent', so I violated that. :| Says could result in dismissal.. I'm in deep trouble it sounds like.

[sm23]

You are not allowed to accrue new debt in BK without approval. However, don't panic. Pay it to zero, do not close it. Just leave it be. Once a year, make a small purchase and pay it off. This will keep it open and not be reported to Credit.

In the EVENT a complaint is made, and I doubt it would be, a simple explanation as you just made in your post, would suffice. Particularly with a zero balance. Worry time is over now so "Live long and prosper". 'Hub

Thank you that post helps put me at ease.. I was out of worry mode for a year and a half! Then this popped me right back in lol. I hope that if I keep it open and do nothing with it the trustee would see that it was a mistake and not a malicious attempt to wrack up more debt.

[justbroke]

In most Districts, you do not have the right to incur new debt or seek new credit without the permission of the Trustee. You can usually read your Confirmation Order to find out what the deal is with "new" credit. In some Districts, they allow debtors to incur up to $5,000 in new credit without prior approval. However, they are the minority.

Best thing to do? Check your confirmation order. If it requires approval, have your attorney draft a letter to the Trustee seeking permission to incur debt. You usually need a TRUE NEED for an unsecured "credit" card, such as business travel or need to rent cars -- although you could travel with a debit card which I have done since 2008 (when I filed Bankruptcy).

What most don't realize is that if you were to run up your credit during an active Chapter 13, you "might" get in such a spot as to be able to convert to Chapter 7. This would mean that all new debt (credit) from the time of filing until the conversion, is now dischargeable and is included in the Chapter 7 as if it happened before the Chapter 13 was filed. This is not a good position to be in for creditors. This is why most of them require a letter from the Trustee before they'll let you incur the debt.

[lrprn]

@sm23 - I'm curious to hear how you got a regular credit card approved *after* filing Ch 13 while still being in an active case that wasn't close to half over yet.

All bk filers (7s and 13s) are compiled in a database that's shared among all the big cc companies, so even if your specific cc lender wasn't included in your filing, 99.5% of them wouldn't touch you with a 10-foot pole without a trustee's permission letter first...and even with that permission most of them still wouldn't touch you.

If it's not too personal (and if it is, then please don't reply and accept my apologies for being too curious), would you mind sharing which cc company granted your card, your interest rate, and if there's an annual fee, how much it is?

You've been given excellent advice so far - put this one in the "live and learn" column, give your lawyer a heads-ups that you forgot/weren't aware of the no new credit and got the credit card, and that so far all is well. The key is to keep it that way.

[lillymarlene]

@sm23 - I'm curious to hear how you got a regular credit card approved *after* filing Ch 13 while still being in an active case that wasn't close to half over yet.

I'm not surprised. I filed chap 13 last October and I'm still getting offers, about every two weeks. I think they even started before my 341.

[sm23]

Thank you for the replies everyone. What I am getting from this is that it is not the end of the world, and just let it be. The high balance on my credit report is $92, so it shows I have used it. I carry a 0 balance on it currently, and will be putting it away so it won't be used.

It was Orchard Bank, $300 limit, 14.9% (the lowest APR available for that card, even!) and $29 for the first year and up to $59 after.

[ChescoChris]

In Philadelphia, there was no handbook or instructions on my confirmation order so I did get a small limit card and a secured card for business travel. My lawyer actually encouraged it. It is so odd how different our experiences really are through the same legal process!

[lillymarlene]

There is nothing about incurring new debt on my confirmation order either. I've thought about getting a very small limit card for business travel, too. (I'd ask my lawyer first.) It still seems that it's impossible to rent a car without a credit card, in some places.

[papie]

Chesco- I've had the same experience. My confirmation order pretty much says nothing except that I need to make $$$ payments for X months. I'm honestly quite amazed at some of the experiences people have with their trustees on these boards.

lillymarlene- rental cars can be such a pain without a credit card. I've rented them with several companies at the airport using my debit card, all they required was a roundtrip airline ticket. Outside of that, I've found only the neighborhood Enterprise locations will easily accept debit cards. Our local office puts a $200 hold on the card for damages and requires two utility bills (to prove our address maybe?) I called around to pretty much every where else in town and they either want to put massive hold on the card or do a credit check.

I hate how so many things are based on credit checks these days.