 Will
new credit card revive old debt?
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 Dear
Bankruptcy Adviser,
I filed for bankruptcy in 1995. It has since been removed from my
credit report. My question is, one of those credit card banks is
now sending me credit card applications again with great interest
rates. If I get that card again, can the "bankruptcy"
balance be re-added to the new card? Thanks.
-- Dee
 Dear
Dee,
First of all, congratulations on the successful discharge of your
bankruptcy AND for getting the mark removed from your credit report.
That's no small feat.
You'll be pleased to know that the answer to your
question is: No. No, the banks cannot add your previous debts back
in. They've been discharged. They're gone. Opening a new account
with them doesn't reactivate the old debt.
But your question does highlight an interesting phenomenon.
The first time I heard of it, a client for whom I'd successfully
filed Chapter 7 called to tell me that banks were harassing him
again. I assumed that he was being contacted by a collection agency
about a debt that had not been included in the bankruptcy, but I
was wrong. He was getting dozens of phone calls a week from banks
offering him new lines of credit.
Here's what's going on: Bankruptcy protection can
only be received once every eight years. If you've just had a bankruptcy
discharged, you're someone with a fresh start and even more incentive
to stay above water because if you do falter, you won't be able
to erase the accumulated debt so easily. That makes you a good risk
for credit card companies. Also, people generally do not file bankruptcy
more than once in their lifetimes. Statistically, that makes you
an even more-positive risk. Dee, you're especially attractive to
creditors because you have not built up new, unsecured debt in the
past 10 years. I suspect your mailbox will see more and more of
these offers.
When choosing a card in a post-bankruptcy situation,
the key thing is to choose a card that fits your overall strategy
to maximize your credit score; that is, the one that will be the
easiest to pay off every month.
First, be careful. Most banks will only offer high
rates. Some offer seemingly attractive deals where you're told that
you're preapproved for a certain rate, subject to the fine print
-- and the fine print explains how the actual interest rate will
be based on your credit (which is not good, of course, as you just
got your bankruptcy removed from your credit report). Credit cards
are the only banking product where you don't know the rate until
the product is in your hands. If the deal is too bad to stomach,
you have to be willing to cut up the card and close the account.
If you use the card just once, you have accepted their terms.
Second, be patient. Don't carry a balance, even if
it does help your score. Just use your card and pay your balance
each month. Every six months ask for a credit limit increase. Every
year ask for a rate reduction. Consider working with a professional
if you need help with any of this or with getting negative marks
removed from your credit report. As time goes by, your score will
improve greatly.
Third, keep new open lines to a minimum. You want
to have a couple of open lines, at most three. Try to avoid department
store credit lines; not only do they limit where you can use them,
but they tend to be issued as "one size fits all" cards
where you have little or no bargaining power to ask for changes.
If you follow these steps diligently, in a few years, you will
have established a positive payment history and your credit will
be strong.
Justin Harelik is a practicing attorney in Los
Angeles. To ask a question of the Bankruptcy Adviser go to the "Ask
the Experts" page, and select "bankruptcy" as
the topic.
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