Shhhh asked:
If a company goes bankrupt, and you have a credit card with them, what happens? Does it clear or do you still owe the payments? Just curios..
If a company goes bankrupt, and you have a credit card with them, what happens? Does it clear or do you still owe the payments? Just curios..
Yes, you still owe the money. Your debt is an asset to them that will become part of the bankruptcy proceedings.
It does not clear. You still owe.
The bankruptcy is between them and their creditors and has nothing to do with you.
Most likely outcome: no change. They will go through a bankruptcy reorganization and they will still have you as an account.
Second most likely outcome: they will raise cash by selling your account to someone else.
Third most likely outcome, they will be merged into another company and you will have an account with the new company.
Your account will be sold as an asset and whoever buys it will want the money or you will end up with bad credit for years.
When a company goes bankrupt, they are saying that they can’t pay their credit debts. Depending on the type of bankruptcy, the court can order them to liquidate all of their assets. The balance on your credit card is an asset called accounts receivable and can be liquidated by selling it to another party. (That’s what Bank or America did when they bought Countrywide Home Loans.) You’ll still owe the debt, but you’ll send your payments to someone else.
Another option is that the court will order the company to reorganize and restructure its debt. The court may eliminate some of the company’s debt, or change the repayment terms, etc. But it won’t eliminate money owed to it. This is what happened with GM and Chrysler. The bond holders were creditors to the automakers, and the court restructured the debt (bonds are a form of debt) by allowing it to be converted into stock.
Either way, you still end up with a bill every month.