But it’s not true. It’s one of the most persistent and damaging myths in personal finance because it keeps far too many people stuck, struggling under debt they could shed with a smart plan.
In fact, bankruptcy can be the first step to better credit. Once your debts are cleared, you have a clean slate, and with the right strategy, you can rebuild faster than you think. So let’s set the record straight about credit cards after bankruptcy: where to get them, why they matter, how to use them wisely, and what to watch out for.
Why Credit Cards Matter After Bankruptcy
The credit bureaus are looking for proof that you’ve turned over a new leaf. They want to see that you’re using the bankruptcy as a financial reset and not a temporary escape. And the only way to show that? Start building a new credit history based on better habits.
It’s kind of like a GPA. If you got an F in freshman Algebra and then never took another class, that F on your report card would play a huge role in determining your GPA. Same thing with your credit score: If all the bureaus have to go on is your old, pre-bankruptcy history, that’s what they’ll continue to judge you on.
That’s where credit cards come in. When you open new credit cards and make on-time payments, you create a new credit history, which drives your score up.
If you don’t get new credit, your report just sits there full of old negative history. But if you do get new credit and follow the 7 Steps, your score starts to shift. It doesn’t take forever. In fact, our clients often hit a 720 score within 12 to 24 months after bankruptcy.
What Kinds of Cards Can You Get After Bankruptcy?
It’s possible (and even easy) to get credit cards after bankruptcy, but not all offers are created equal. Some credit cards are designed for people with poor credit and come with high interest rates, also known as Annual Percentage Rates (APR). The higher the APR, the more you’ll pay if you carry a balance from month to month. That’s why it’s essential to understand your options.
If you have trouble qualifying for a traditional unsecured card, don’t panic. You’ve got other tools at your disposal, including secured credit cards and authorized user accounts. If you’re searching for the best credit cards after bankruptcy, focus on options that are designed to help you rebuild, not trap you with fees or sky-high interest rates.
Explore this curated list of the top credit cards after bankruptcy.
Secured Credit Cards
Secured credit cards are a common starting point. You’ll pay a refundable deposit (usually between $200 and $500) and that deposit becomes your credit limit. If you put down $400, you can spend up to $400. But your deposit doesn’t go toward your balance; instead, the deposit is collateral.
If you don’t, the lender can keep your deposit and report a late payment.
Authorized User Accounts
Another strategy is to ask a trusted friend or family member to add you as an authorized user on one of their credit cards. You won’t have to apply or put down a deposit, but you’ll benefit from their credit history, assuming they manage the card well. But beware: If they miss payments or carry a high balance, it could hurt your score instead of helping. So choose someone responsible, and make sure they understand how their activity will impact you.
Some people use both approaches: they open a secured card to build their own credit and also become an authorized user to boost their history even faster.
Press Play: How Can I Improve My Credit Score Fast?
How to Use Credit Cards the Right Way After Bankruptcy
Here’s my simple formula from 7 Steps to a 720 Credit Score:
- Use each card every month
- Keep your spending below 30% of your credit limit
- Pay the balance in full and on time
- Set up autopay to avoid missing a payment
Now here’s the part most people don’t expect: It’s actually better to open multiple cards at once. Why? Because they age together. If you stagger them, you’ll always have new accounts pulling your average age of credit down.
Yes, you might see a temporary drop when you open them all at once. But your score is already low from the bankruptcy. In six months, those accounts will start working for you instead of against you.
What to Avoid
Avoid cards with high annual fees or outrageous interest rates. You don’t need fancy rewards cards right now. Look for basic cards from reputable banks or credit unions. And avoid applying for store cards or offers you get in the mail unless you’ve reviewed the terms carefully.
When to Start
You don’t have to wait seven years. You don’t even have to wait one.
The best time to start rebuilding is right after your Chapter 7 discharge or your Chapter 13 confirmation. This is because it takes one to two years for your credit score to bounce back after a bankruptcy (assuming you follow the 7 Steps).
If you wait too long, you’ll just be delaying your recovery.
Need Help?
If you’re considering bankruptcy, talk to a debt professional. The earlier you understand your options, the more control you’ll have.
Click here to schedule a free consultation with a debt professional.
Related Articles:
“Pros and Cons of Filing Bankruptcy: What the Banks Don’t Want You to Know”
“Can You File Bankruptcy and Keep Your House?”
“If I File Bankruptcy, What Happens to My Car?”
FAQs About Credit Cards and Bankruptcy
FAQ: Can credit card debt be discharged in bankruptcy?
Yes. Most credit card debt is considered unsecured debt, which means it’s not backed by any collateral like a house or car. That makes it eligible to be discharged in both Chapter 7 and Chapter 13 bankruptcies. But there are exceptions. If you used your credit card to make luxury purchases or take out cash advances within 90 days of filing, the court may see that as fraud, and those charges might not be discharged.
According to the Federal Reserve, nearly 60% of bankruptcy filers carry high balances on multiple credit cards. Bankruptcy was created to help people out of exactly this kind of financial pressure. As long as the charges were made in good faith, they can usually be wiped clean.
FAQ: What happens if I stop paying my credit cards before filing for bankruptcy?
If you stop paying your credit cards before filing bankruptcy, the consequences can build up fast: missed payments, late fees, damage to your credit score, and eventually, collection activity or lawsuits. But once you officially file for bankruptcy, everything changes.
That’s because bankruptcy triggers something called an automatic stay. This is a legal protection that stops most collection activity immediately. Creditors can’t call you, send letters, sue you, garnish your wages, or take money from your bank account. The automatic stay is one of the most powerful tools in bankruptcy because it gives you breathing room while your case moves through the courts.
But here’s the catch: the automatic stay doesn’t kick in until you officially file. If you wait too long, you leave yourself exposed. I’ve seen people try to hang on for just a few more weeks, only to get hit with lawsuits or bank levies right before filing. If you know bankruptcy is likely, speak to a debt professional early so you can file at the right time and protect yourself fully.
FAQ: How much credit card debt is “too much”?
There’s no single dollar amount that makes debt “too much.” It depends on your income, your interest rates, and your ability to make progress. That said, if you’re only making minimum payments, if your balances are growing instead of shrinking, or if your debt-to-income ratio is over 40%, it’s a red flag.
One simple check: if you couldn’t realistically pay off all your credit card debt in two years, even if you cut back and made sacrifices, you’re likely a good candidate for bankruptcy.
I’ve worked with many people who have tried to power through their debt on their own for years, sometimes even decades. And in doing so, they lost valuable time they could have spent building wealth. When every dollar you earn is already spoken for, you’re not building wealth, you’re treading water.
FAQ: How long do credit card companies wait before suing?
Most wait 6 to 12 months after you stop paying before filing a lawsuit, but some act faster, especially if the balance is large or they believe you have income or assets. Capital One and Discover, for example, are known for aggressive collections.
A 2022 study found that debt lawsuits make up over 20% of all civil cases in many U.S. courts. Lawsuits can result in wage garnishments, liens, or bank account levies. Bankruptcy stops all of that immediately through something called an automatic stay.
An automatic stay is a powerful legal protection that kicks in immediately when you file for Chapter 7 or 13 bankruptcy. Think of it like hitting a pause button on most of the collection activity happening in your life. As soon as your case is filed, the court issues an order that legally stops creditors from trying to collect. That means:
- No more collection calls
- No more wage garnishments
- No more lawsuits or foreclosures
- No more letters demanding payment
This protection is automatic. You don’t have to request it, and creditors must follow it by law. Violating the automatic stay can get them into serious legal trouble.
The automatic stay gives you breathing room while the courts sort through your financial situation. For many people, it’s the first moment they feel real relief, and it happens well before the debt is discharged (Chapter 7) or confirmed (Chapter 13).
