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New Jersey bankruptcy: Should you close credit card accounts?

Since the beginning of the recession, there seems to have been an ever increasing amount of people who aren't just using their credit cards for luxury purposes. Instead, many New Jersey families have found themselves living off of their credit cards when times were tough. As the economy begins to show signs of improvement, people are looking at ways to reduce and eliminate their credit card debt such as debt consolidation, balance transfers, credit counseling, and bankruptcy.


One of the first things people will think about doing is getting rid of their credit cards altogether. People will cut them up and cancel their accounts. However, this may not be the best course of action for some people. Closing accounts has an effect on a person's credit score, the question is whether the impact is worth it or not.

It is often recommended that people leave their credit card accounts open, but simply not use them. As the debt is paid off, something call a "utilization" ratio that is used to help evaluate creditworthiness can improve so long as no additional debt is added to the accounts. The lower this utilization percentage, the better off a consumer will be with regard to creditworthiness.


However, there are times when keeping an account open is not going to be of any help to a consumer. There are many consumers in New Jersey who have become buried under a mountain of debt and can't see a way out. For those that are struggling with their debt, bankruptcy may be the answer. Where it is true that filing bankruptcy will have a negative impact on a credit score, the damage is only done once. If someone continues to struggle with their debt and is repeatedly late or delinquent on their accounts, that credit score will only continue to decline.


Source:, "The Surprising Downside of Cutting Up Your Credit Cards," Matt Brownell, June 5, 2013

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