If you file for bankruptcy, it’s going to impact your ability to hold a credit card. In some instances, a person filing for Chapter 7 bankruptcy will try to keep one credit card with a $0 balance. But they will usually find the card gets canceled once the bank learns of the bankruptcy since credit card companies take measures to manage risk, and filing for bankruptcy changes your risk level.
With your old cards gone, you’ll need to apply for a new credit card now that your bankruptcy is behind you, and demonstrate to the credit card issuer that with your debts gone, you’re a better risk after bankruptcy. This is your chance to start building your credit history again.
But what if you’re running a business, and rely on a business credit card to help finance it? Let’s take a closer look at what happens to your business credit card debt when you file for bankruptcy.
How Does Bankruptcy Affect My Business Credit Card Account?
Business owners struggling with credit card debt have help available to them. That includes:
- Small-business financial counseling
- Other educational programs
- Refinancing options
- And bankruptcy as a way to restructure their debt.
Many of them will have a business credit card, which enabled them to separate their business and personal finances. In fact, it’s been estimated that about half of small-business owners have a business card that they use to run their business, making those cards an easy and reliable source of funds for small businesses.
Still, small-business owners face some risks, because carrying a balance on a business card is different from using a personal card. Consumers are protected by the Credit CARD Act, which prohibits sharp interest rate hikes for no reason. That doesn’t apply to business cards.
What happens to your business credit card debt if you file for bankruptcy? If you’re filing Chapter 7 bankruptcy, your business assets could be sold. In addition, when someone files for personal bankruptcy, it covers their personal debts — but not their business debts. So any debts on your business credit cards don’t get eliminated by the bankruptcy. And it means your business is responsible for the debt.
In addition, the same rule can apply as the effect on your personal credit cards. It’s possible the card issuer could notice your bankruptcy and limit your access to credit or cancel the card.
What Happens If My Business Gives Me a Corporate Credit Card?
If you work for a company that requires you to travel often, your employer might provide you with a credit card to pay for travel expenses or for buying supplies. It’s likely to one of two cards:
- An authorized user account
- an obligor account.
An authorized user account is a corporate credit card in the employer’s name. As an employee of the company, you’re an authorized user for business-related expenses that are usually billed directly to and paid by the company.
If you’re filing for bankruptcy, you don’t need to list this account in your paperwork. The card is not in your name, and chances are you should be able to continue using this card after the bankruptcy is completed.
The only difference to that rule is if you used the card to pay for items your employer doesn’t cover and you owe some debt to your company. You would need to list your employer as a creditor in your bankruptcy for that debt to be erased.
If you’re not an authorized user, it means you’re an obligor on the account, or the sole person liable for paying the balance. This is often the case with people who charge certain business expenses on a card that gets billed directly to you, and you seek reimbursement from your employer for those costs. Whether you need to report that account depends on whether there’s a balance on it. You do need to list a balance on the account in your bankruptcy filing if you’re liable for the debt.
While that debt will be discharged in a Chapter 7 case, the credit card issuer will likely close the account.
If it doesn’t have a balance, you may be able to leave it out of your bankruptcy paperwork and possibly keep the card, although keep in mind that credit card companies and banks routinely review bankruptcy filings and close accounts for any cardholder with a bankruptcy on their record. Also, keep in mind that you’ll have to report any significant payments in your paperwork.
If you’re not sure how your business debt or business credit card will impact your bankruptcy plans, it’s best to speak with an experienced bankruptcy lawyer first.
Trust an Experienced Bankruptcy Attorney in Louisiana
When you’re considering this process, a good bankruptcy attorney can help you understand which approach to bankruptcy is going to work best for your situation.
Orum Young Law has more than 35 years helping the people of Northeastern Louisiana file for bankruptcy and regain control of their finances. In those 35 years, we have filed more than 20,000 cases and experienced unbelievable success. We help our clients understand the basic aspects of their case, including how to determine their expenses and handle any necessary filings.
Contact us today at (318) 450-3192 to schedule your free case review and start protecting your family’s future.