Secured Credit Cards in Bankruptcy and Beyond

 Posted on February 10, 2025 in Bankruptcy

Life takes money, and one of the ways Americans pay for the things that they need is with credit cards. There are about 600 million credit card accounts in the United States, and approximately 90 percent of American adults have at least one credit card. Credit cards are convenient, yet they are also significant contributors to the massive debt that Americans have, with an average household credit card debt of $8,871, according to recent data.

So while credit card debt is a big reason why many people file for bankruptcy, it is also a convenience and even a necessity in today’s world. After all, building credit is a healthy financial goal, and credit cards help build credit.

One type of credit card that can be a good middle ground to build credit while keeping excessive debt at bay is a secured credit card. That is why it is also potentially a good tool to use after bankruptcy. An experienced Wise County, TX bankruptcy attorney can advise you on the effect of a secured card during your bankruptcy and beyond.

What Is a Secured Credit Card?

A secured credit card is a credit card "secured" by a deposit you make with the credit card company. This security deposit acts as collateral for creditors while limiting your risk as a borrower. Your spending limit is usually equal to the value of the cash account that is attached to the secured credit card.

What Happens to Secured Credit Card Debt in Bankruptcy?

In bankruptcy, secured creditors who have collateral on assets (whether that is a vehicle or a secured credit card account) tend to get paid first. Secured credit card debt is usually dischargeable. However, because the debt is secured, whereas traditional credit card debt is not, secured credit card debts will likely take priority over other unsecured debts in bankruptcy. Because the debt is secured, you will generally not be able to keep assets you bought with secured credit cards.

How Can a Secured Credit Card Benefit Me After Bankruptcy?

Like traditional credit cards, secured credit cards report to the credit bureaus, charge you interest on your balance, and require that you make on-time payments. For these reasons, secured credit cards can be a great way to build credit back after bankruptcy, providing you with a way to do so while making it harder to amass debt. Additionally, because secured credit cards are designed for people who want to build credit, they often have lower or no credit score requirements, making it easier to get a credit card just out of bankruptcy discharge.

Contact a Parker County, TX Bankruptcy Attorney

Whether you have significant credit card debt and are filing for bankruptcy or want to know how to build credit after bankruptcy, at Acker Warren P.C. our attorneys are here to speak to you about these concerns. The experienced Wise County, TX bankruptcy attorneys can advise you on the secured credit cards in bankruptcy and after bankruptcy. Call our offices at 817-752-9033 for a free consultation.