Why some banks cancel CC's after BK7?

[alberto2005]

Hi, again!

Well, my lawyer told me that I can continue paying one or two CC's before, during, and after BK7. However, I keep reading on forums and online that banks will usually cancel CC's once they find out about one's BK7, and I really don't understand this. I don't. And I will give you the reason. Let's say that I owe $1,500 on one credit card, and I continue paying it before, during, and after BK7. If all of a sudden this $1,500 credit card is cancelled by the bank after BK7, well, since it was included as part of BK7, I simply stop paying them. So why would a bank want to cancel a CC after BK7 if I am still paying them?

Best to all,

Albert L.

P.S.: Before anybody asks me why I would continue paying this and that CC since the debt will be discharged anyway, I am just speaking "hypotetically" without deciding on anything yet. Thanks!

[HHM]

Some do, some don't. Obviously, the cards with higher balances that were discharged in a bankruptcy will almost certainly cancel the card.

As I understand it, its actually a very cold, mathematically decision. First, it depends on the type of card it is in the first place. If you had good credit and had an upper crust card like a Platinum Visa with various benefits, and a low APR. That card will certainly be cancelled, not so much "because" you filed BK, but because of the BK, you no longer fit the banks acceptance guidelines for that particular card.

If you had bad credit and already had a basic card with a high interest rate...if a debt was dicharged, it will probably be cancelled, but if no debt was discharged, the account would probably still remain open (because you still fit the profile for that card), but the available balance may be lowered and your interest rate will be probably be raised to the legal maximum.

It's not so much a money issue with the credit card companies, i.e. whether in your particular case they stand to continue to make or lose money; its a risk issue, and credit card companies make their offers based on risk profiles. Why "most" credit cards get closed after a bk (rightly or wrongly) is that the particular bankrupt consumer no longer fits the risk profile for the credit cards they had before the bk.

Also, you do not want to keep paying on anything with more than a few hundred dollar balance...those accounts will probably get closed upon a routine audit.

[Whittio]

My mom got a notice from her cc company, telling her the account was closed, and to destroy the card. Maybe that's why they close them, so you can't use them and rack up more debt??

But it does sound odd that you would want to keep paying on debt if you're going through BK, it's all about a fresh start, why would you want to keep paying on them.. you may as well not file BK and just keep paying.. :s

[StaciMM]

I think some people want to keep 1/2 for 'just in case' situations, and due to a fear of having no credit.

I can see the banks point of view, even for a low balance or $0 balance card. To qualify for BK, the petitioner is saying they have very little or no available income for extras. If that is the case, as a creditor, my logic would be that if you have little or no disposable income then you probably can't afford minimum payments so it would just be a matter of time before you default on me.

[mmcconn2]

Take the clean start get rid of all the old cards, there are people out there that will give you another credit card all you have to do is look. This is also a very good way to start to re-build your credit after BK