When filing a petition for bankruptcy, you must, by law, list all outstanding credit. But what about credit cards with a zero balance? It is an interesting situation because, since it has no outstanding credit, it need not be listed in your schedule of creditors. It also has ramifications that go beyond bankruptcy.

There is no legal requirement to advise the credit card issuer of your bankruptcy. Therefore, if you continue to pay the annual fee, you will in theory have a line of credit the day you are discharged from bankruptcy. Of course, your bankruptcy is a matter of public record and almost all card issuers go through these records trying to match new petitioners with their cardholder database. If they find a match, they will either cancel the card altogether or seek to have the holder sign a new agreement once they have been discharged.

This raises a number of issues, one of them being whether or not you should pay off any low balance credit cards prior to filing your bankruptcy petition.  In most cases, credit card providers will discover your bankruptcy petition and they will cancel your card. On the other hand, if you have paid off these debts first, then there will be fewer creditors on your schedule.

One area of bankruptcy that does disturb the courts is the number of credit cards and the level of debt you hold. If your debt levels are unreasonably high, for example, five credit cards all maxed out, then your own spending habits and credit judgment could be called into question. By paying down one or two, you could improve your overall situation.

Credit card debt is an interesting component of bankruptcy that often needs the help of an experienced bankruptcy lawyer. While you may be able to walk away from bankruptcy with an available line of credit, I wouldn’t bank on it. There is one thing that is certain, if that empty credit card starts to burn a hole in your pocket, and you relent, that act of taking on new debt before being discharged could negate the whole bankruptcy process, and it could lead to criminal charges being placed. If your credit card has a zero balance, keep it that way until you have been discharged.