Bankruptcy and Credit Cards
No one likes the word bankruptcy. It appears as if your financial situation has gone through a disastrous experience. Unfortunately, this disastrous appearance is one of the unfortunate outcomes when a person, or an organization, files for bankruptcy.
A Changing Mind Set
The legal status of bankruptcy is relatively new in the United States. In the past, the sons of the debt owners inherited the debt. Or, in the worst case, the family members of the debt owner became slaves of the creditor for a determined period of time.
With time, this law changed. Instead of forcing slavery onto the family members of the person who owed the debt, the owner of the debt could face a jail sentence. Fortunately, this practice changed. After all, it is pretty much impossible for a debtor to repay the money owed when he or she is in jail! Therefore, people no longer have to face the possibility of going through a trial and a period of incarceration.
In our modern, and more civilized world, any person who really can’t pay his debts can apply for bankruptcy. Currently, there are several different types of bankruptcy classifications for individuals and organizations. Each one of them is designed for specific cases and made for protecting determined persons or companies.
After Filing Bankruptcy
Once a person has filed for bankruptcy, this information is spread throughout the financial system via credit reports. In the past, this information could take some time to reach every financial institution in the country. But, thanks to computers, it only takes a day or two for institutions throughout the nation to remain informed.
Yet, for some reason, many consumers still receive a flood of credit card offers from credit card companies even after filing for bankruptcy. How is that possible? There are two main reasons behind this apparent contradiction.
First of all, the fact that your current financial status is available does not necessarily mean the credit card companies have accessed your most current information. As a matter of fact, they may never actually check into your financial status before sending you invitations to apply for their card. After all, to do so would require investing money in equipment and people. Therefore, it is less expensive to send out mailings and to only check into the credit history of those who actually apply for the card.
The second explanation for receiving credit card invitations is that some credit card companies simply don’t care about your financial situation. Although they may know you have recently filed for bankruptcy, they still see you as a potential source of future business.
This is because you are considered “out of the system.” By this, it means no traditional financial entity will offer you credit until your bankruptcy situation has been resolved. This means you are probably somewhat desperate for a line of credit and are willing to pay fees and high interest charges. In addition, you are likely looking to rebuild your credit and, therefore, will be more cautious with your credit this time around.
Preying on the Bankrupt
In reality, there are many credit card companies that make it their business to offer credit cards to people that are bankrupted. Since these costumers entail a higher risk than a typical card user, the cards have higher Annual Percentage Rates (APR’s). In this way, the credit card company builds in a margin of safety for clientele who may not pay his or her debt.
Credit card companies know that bankrupt individuals are pretty helpless in today’s world. If they don’t have a credit card they won’t be able to make hotel or plane reservations, buy online with many stores, or rent a car. So, even though bankrupt individuals are under a huge financial stress, they still need a credit card in many ways to maneuver through today’s world – even if it means paying higher interest rates and giving up many of the attractive benefits commonly associated with traditional credit cards.
So, no matter how badly your credit record has been damaged from past credit misdeeds, there will likely always be companies willing to help you acquire a credit card. Of course, this convenience often comes at a pretty hefty price.