Bankruptcy is about helping you get out from under your debt, not taking on new obligations. In some situations, you may be able to get permission to take out new credit from your bankruptcy trustee if you can show a genuine need. However, if you apply for a new credit card during a bankruptcy process without your trustee's permission, you face serious consequences, including possible criminal charges.
Finances During Bankruptcy
If you file for bankruptcy, your finances come under the control of your bankruptcy trustee who has to know about every aspect of your financial life, including all debts and assets. During the process, you are accountable for how you spend your money and shouldn't take on any additional financial obligations without getting permission to do so.
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy is a relatively short process in which a bankruptcy trustee pays your creditors something of what you owe from what assets you have left. After your creditors are paid, your bankruptcy judge eliminates your other debt. The process takes about four to six months, after which you are free to take on new debt. However, during the actual process of Chapter 7, you must honestly disclose all of your debt. If you take on new debt during this time and don't disclose it, you have committed fraud. Your case may be dismissed and you may even face fines and criminal charges.
Chapter 13 Bankruptcy
Chapter 13 bankruptcies take much longer than the Chapter 7 process. This is because Chapter 13 bankruptcies do not require debtors to immediately repay creditors from their assets, but instead impose a multi-year debt repayment plan on the filer. Bankruptcy trustees supervise the repayment plan and both collect and disburse payments to creditors. Individuals who file for Chapter 13 cannot take on any new debt without permission from their trustee until after they complete their repayment obligations. If you take out new debt without your trustee's permission, your bankruptcy may be dismissed.
Getting Trustee Permission for New Credit
If you are repaying your debts under a Chapter 13 plan and need to obtain a credit card, you should contact your bankruptcy lawyer. She can help you prepare a request to be submitted to your bankruptcy trustee. Your trustee will want to know why you need the credit card and will also want to see how you can fit the payments on your new card within the budget you have established for yourself. You may have a better chance of getting permission to apply for credit if you can show that you have a legitimate business or job-related reason for the card, such as a heavy travel schedule, as well as an increase in your income.
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