I get this question all the time. In preparing a Bankruptcy Petition and Schedules, it is required to list all outstanding liabilities including any balances owed on credit cards. To the extent a balance is owed then it will be “in” the bankruptcy. The reverse is also true. If there is no liability then it will not be listed. So, on credit cards with a zero balance, it is possible to keep those accounts open even after Bankruptcy. That does not mean you can keep them indefinitely.
The credit card company will eventually learn of the Bankruptcy when they do their periodic credit check on the account, usually semi-annually. If they want to keep the client as a customer then they will keep the account open and allow the client to use the available credit. If they want to close the account there is nothing we can do to stop them because the act of filing a Bankruptcy is a default pursuant to the credit card holder agreement, even if the company does not suffer a loss. In my experience with my clients I see it is about 50/50 proposition.
In about half of the cases the client is able to keep the account open going forward. If they do keep the account active then it is an excellent way of rebuilding credit after Bankruptcy since part of the FICO score calculations involves how long the account has been open and these accounts would pre-date the Bankruptcy filing.
I do not recommend paying off the debt in hopes of keeping the account open post-bankruptcy unless the balance is really small. Anything over $200.00 I recommend discharging in the Bankruptcy case.
Ron Holmes is managing parter of the Albuquerque office of Davis Miles McGuire Gardner. He can be reached at (505) 268-3999.