Credit cards are often referenced in bankruptcy filings. Many Americans have credit card debt, even if it’s just minor debt, like using a credit card to pay the utilities. Some households do the bulk of their monthly spending on cards and then pay them off each month.
Others, though, can fall victim to overspending on credit cards, which can rake up a significant amount of debt that they can’t afford to pay. Someone may have a card with a $20,000 limit, but maxing out that card would either mean they have to come up with $20,000 by the end of the month or interest rates are going to apply.
Often, it is these interest rates that eventually cause the person to declare bankruptcy. Making the minimum payments means that the balance is likely still going up because these rates are so high. Clearing that debt through bankruptcy becomes the only option. In this sense, credit cards can cause a bankruptcy filing.
Rebuilding your credit score
But there’s another thing to consider if you are thinking about filing for bankruptcy yourself. You can also use secured credit cards to rebuild your credit score after that filing goes through. Secured cards require you to make a down payment, so there isn’t a risk for the lender, but making timely payments still improves your credit score.
This is important because a bankruptcy filing will have a negative impact on that credit score. By taking the correct steps to rebuild it, though, you ensure that this negative impact is only temporary. If you’re considering bankruptcy, be sure you understand all the legal options at your disposal.