Do I Have to Reaffirm Credit Cards and Department Store Cards When Filing Bankruptcy?
It’s almost never a good idea to reaffirm a credit card. Reaffirming means you will pay bills that your bankruptcy would normally wipe out. That can be a very high price to pay for the convenience of a credit card. Try paying with cash for awhile after your bankruptcy case is over. Then, in a year or two, you’ll probably be able to get a new credit card that won’t come with a large unpaid balance!
If you do reaffirm a credit card or department store card, try to get something in return like a balance reduction or lower interest rate. DO NOT get stuck paying 18-21% or higher!
Some department store credit cards may actually be secured by collateral – or the things you’ve purchased with the credit card. The store might tell you that they will repossess what you bought, such as a TV, washer, or sofa, if you do not reaffirm your debt(s). Most of the time, stores will not repossess used merchandise. So, after a bankruptcy, it is much less likely that a department store would repossess its collateral than other lenders like a car dealership.
However, repossession is legally possible if you choose to keep the collateral without reaffirming your debt(s). You have to decide how important the item is to you or your family. If you can replace it cheaply or live without it, then you should not reaffirm. You can still shop at the store by paying cash, ad the store may offer you a new credit card even though you don’t reaffirm. (Just make sure that your old balance is not added into the new account.)
Some offers to reaffirm may seem attractive at first. Let’s say a department store lets you keep your credit card if you reaffirm $1000 out of the $2000 you owed before bankruptcy. They say it will cost you only $25 per month and they will also give you a $500 line of credit for new purchases. What they won’t tell you is that they will give you a new credit card in a few months even if you do not reaffirm the $2000 you originally owed. More importantly, you should understand that, in this example, you would be agreeing to repay the department store $1000 PLUS interest, which forces you to pay on a debt that bankruptcy allows you to completely cancel. This is a hefty price to pay for just $500 in new credit.
If you have questions about reaffirming credit cards and department store cards, contact our offices in Denver today to speak with a knowledgeable attorney who will help you understand your options.