Yes, you will almost certainly lose your credit cards when you file Chapter 7 bankruptcy, as creditors typically close accounts once they learn you've filed, even if they have a zero balance, because filing is considered an act of default. While you can't keep cards through the discharge, you can sometimes keep one with a zero balance if the lender agrees, but most often, the card gets closed anyway, and you'll get new offers later for secured cards or cards with low limits, notes this YouTube video and Experian.
Key Takeaways: Expect to give up your credit cards in Chapter 7 bankruptcy. Bankruptcy law requires you to list all debts in your petition, and credit card companies cancel accounts after finding a bankruptcy filing on your credit report. You won't list corporate accounts in which you're solely an authorized user.
An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case. A creditor may no longer initiate or continue any legal or other action against the debtor to collect a discharged debt. But not all of an individual's debts are discharged in chapter 7.
A Chapter 7 bankruptcy is typically removed from your credit report 10 years after the date you filed, and this is done automatically, so you don't have to initiate that removal.
When your Chapter 7 bankruptcy falls off your credit report (after 10 years), your score can jump significantly, often 30 to 100+ points, but the actual increase depends heavily on how well you've rebuilt credit with on-time payments and low credit utilization in the years after the bankruptcy. While the bankruptcy record disappears, the underlying financial habits and other positive accounts you've established are what truly dictate the size of the boost, showing lenders you're a responsible borrower now.
The main cons of Chapter 7 bankruptcy are a severe, long-term hit to your credit (up to 10 years), potential loss of non-exempt assets (like second homes or luxury vehicles) as they are sold to pay creditors, restrictions on refiling for another 8 years, and the fact that some debts (like student loans, child support, and some taxes) are not discharged. You must also pass a means test to qualify, proving your income is low enough.
Bankruptcy in California
Typical items protected under bankruptcy exemption laws might include: A home. A car, or cars depending on their values. Most furniture and appliances, including your TV and family computer.
Declaring bankruptcy can raise a number of concerns and cause immense pressure. It is crucial to be aware that while bankruptcy itself is not a criminal act, fraudulent activity associated with bankruptcy proceedings can lead to serious legal consequences, including imprisonment.
The Chapter 13 Trustee is required to report to the Bankruptcy Court if you fail to make payments on time or in full. The Court may then enter an order dismissing your case and withdrawing the protection of the Bankruptcy Court. If that occurs, you then could be subject to creditor collection efforts and other actions.
To qualify for Chapter 7 bankruptcy in California, your income must be below the state's median income for your household size. For example, as of 2025, the monthly income limit is $5,030 for a single-person household and $8,620 for a four-person household.
The good news for those considering filing is that Chapter 7 bankruptcy has a high success rate. In fact, approximately 95-99% of Chapter 7 bankruptcy filings are successful, meaning that the vast majority of individuals who file receive a discharge of their eligible debts.
You must list every single one of your debts. This includes all your credit cards, even if a card has a zero balance or you want to keep it. This rule is part of your duties as a debtor under the U.S. Bankruptcy Code.
The 2/3/4 rule is a guideline, primarily used by Bank of America, that limits how many new credit cards you can get: no more than 2 in 30 days, 3 in 12 months, and 4 in 24 months, helping to prevent over-application and manage hard inquiries on your credit report. While not universal, it's a useful benchmark for responsible card application, though other banks have different rules (like Chase's 5/24 rule).
Banks would much rather you not file for bankruptcy when you're in need of debt relief. They'd rather steer you toward other debt settlement options that could more benefit them. The bank may nudge you toward things like payday loans, maxing out all credit options, or borrowing money from family and friends.
When you file for bankruptcy, if you are up to date on your payments or you can bring your payments up to date, most courts will not have a problem with allowing you to keep your phone.
Cons of Filing Chapter 7 Bankruptcy
Concealing or Omitting Assets
Failing to disclose all your assets or income is one of the most serious mistakes you can make when filing for Chapter 7 bankruptcy. It's essential to report every asset, from cash accounts to vehicles and real estate.
It's not a regularity, but it does happen. Sometimes, a creditor files a lawsuit on debt, that was discharged in your Chapter 7 Bankruptcy. In most instances, this isn't supposed to happen! You're not supposed to be sued after bankruptcy on discharged debt!
You can receive tax refunds while in bankruptcy. However, refunds may be subject to delay, to turnover requests by the Chapter 7 Trustee, or used to pay down your tax debts.