U.S. credit card issuers are no longer shunning the newly bankrupt -- in fact, they want them to have their credit cards back. In light of the changes in the new bankruptcy law, credit card issuers, such as Citigroup and Capital One Financial, are reconsidering how they handle bankruptcy filers applying for a credit card. In the past, it was common to deny them credit for up to seven years after they filed. Now, though, issuers are considering giving them a second chance, according to a Reuters news report.
Thatís because changes in the bankruptcy law, which took effect Oct. 17, make filers less of a credit risk, issuers reason. Many who file for bankruptcy will now only qualify for Chapter 13 bankruptcy, which requires consumers to pay back some of their debts - rather than Chapter 7, which erased their debts. Plus, the newly bankrupt wonít be able to wriggle their way out of their debts since the new law now says they canít re-file for bankruptcy again for two to eight years.
Credit card issuersí re-evaluation of bankruptcy filers coincides with a 25 percent to 35 percent spike in bankruptcy filings this year. Nearly 2 million people filed for bankruptcy this year, mostly due to the rush filing the weeks before the new bankruptcy law took effect in mid-October, according to analysts at Standard & Poor. That surge contributed to higher charge-offs for credit card companies in their third and fourth quarters.