When you decide to file personal bankruptcy, you are required by law to give all of your credit cards to the trustee for cancellation. A common question that arises when I inform a client of this requirement is, “do I still have to surrender a credit card if it has a zero balance?” The answer is yes.
Section 158(a.1) of the Bankruptcy & Insolvency Act states that a bankrupt shall:
deliver to the trustee, for cancellation, all credit cards issued to and in the possession or control of the bankrupt
After your case is filed, the trustee is required to notify all creditors of the bankruptcy. If you omit the credit card with zero balance, the lender may not be notified of the bankruptcy right away. Therefore, the lender could end up lending to you without knowing that you have just filed bankruptcy.
Now, this doesn’t mean that if you file bankruptcy, you won’t be able to get a credit card after you’ve been discharged from your bankruptcy (or even during your bankruptcy). There are a few ways that you can still be accepted for a credit card.
Supplementary Card (can get during bankruptcy)
Prepaid Card (can get during bankruptcy)
If you know someone who has total trust in you, being a named a supplementary cardholder is another way to get a credit card and start regaining your credit. A supplementary cardholder is actually the account holder and they bear all responsibility for any debt. But, they can put your name on it so you can have a card and use their account.
In this case, you load the card with money, and you can spend whatever is on the card. Once the money is spent, the card is worthless, unless you re-load it, just like a Tim Horton’s card. Before you get one of these cards though, you need to know that they are expensive. There is usually a large fee to load the card. Use these only when you have no other payment option.
Secured Credit Card
Often, lenders will provide a secured credit card for individuals that have gone through bankruptcy or have a bad credit rating. A secured credit card works just like a regular credit card, but you can only spend up to the amount of your security deposit. In other words, if you pay your financial institution a lump sum of money up front, that acts as your credit limit. This helps you to establish a payment history and demonstrate your credit worthiness.