Can I pay off a credit card to keep it after bankruptcy?
A common question among individuals considering Chapter 7 bankruptcy is whether they can pay off a specific credit card to retain it post-bankruptcy. The answer, while straightforward, requires understanding the nature of Chapter 7 bankruptcy.
Firstly, Chapter 7 bankruptcy is designed to provide a clean slate by discharging most unsecured debts, including credit card debts. When you file for Chapter 7, you are required to list all your debts, regardless of your intention to pay some off. The bankruptcy trustee reviews all your debts and assets to determine if any can be liquidated to repay creditors.
Paying off a credit card debt just before filing for bankruptcy, especially if it's a significant amount, may not be advisable. Such a move can be viewed as preferential payment, where one creditor is favored over others. This can lead to complications in your bankruptcy proceedings. The trustee might reverse this payment to distribute it equally among all creditors.
Moreover, credit card companies, upon learning about your bankruptcy filing, might choose to close your account regardless of whether it has a zero balance. Their decision is based on the risk assessment of your financial situation post-bankruptcy.
In short: the answer is no.
In conclusion, while paying off a credit card to keep it post-Chapter 7 bankruptcy might seem like a viable strategy, it is fraught with legal complexities and risks. If you have further questions, call us at Pioneer Bankruptcy to help guide you.