Can I Get a Cell Phone While in Chapter 7?
Understand your cell phone service options during and after Chapter 7 bankruptcy. Get practical advice on managing existing plans and securing new connections.
Navigating personal finances can be challenging, and filing for Chapter 7 bankruptcy is often a necessary step for a fresh start. A common concern during this process involves maintaining essential services, particularly cell phone service. Understanding how Chapter 7 impacts existing contracts and options for new service is important for staying connected. This article provides guidance on managing cell phone service during and after bankruptcy.
Your Current Cell Phone Service and Chapter 7
When filing for Chapter 7 bankruptcy, your existing cell phone contract is typically considered an executory contract. This means both parties still have obligations to perform. In bankruptcy, you can either assume (keep) or reject this contract.
If you choose to reject your cell phone contract, you are generally no longer liable for charges incurred before the bankruptcy filing date, and any outstanding debt is discharged. This can be beneficial if you are in an expensive plan or owe significant past-due amounts. However, if you reject the contract, the service provider may terminate your service.
While it is possible to reaffirm a cell phone contract, it is generally not recommended. Reaffirming means agreeing to remain legally responsible for the debt, which often does not align with a Chapter 7 discharge. Most cell phone contracts are unsecured debt, unlike secured debts such as mortgages or car loans. If you wish to continue service, especially if current on payments, you can often do so without formal reaffirmation, as courts typically view cell phones as a necessary expense.
To manage your current service leading up to filing, consider paying off any arrears to avoid immediate termination. If you anticipate rejection or termination, transitioning to a prepaid plan before filing can ensure continuous communication. You must disclose all assets, including your cell phone, and all executory contracts in your bankruptcy paperwork.
Options for Obtaining New Cell Phone Service
Individuals navigating Chapter 7 bankruptcy have several options for securing new cell phone service. Prepaid plans are a widely accessible choice because they do not require a credit check. With these plans, you pay for service in advance, eliminating risk for the provider. Many carriers offer various prepaid options, allowing for budget control and flexibility.
No-contract or month-to-month plans also offer flexibility and may be easier to obtain. These plans typically do not involve lengthy agreements associated with traditional post-paid services. Some providers may still conduct a credit assessment, but requirements are generally less stringent.
Joining a family plan can be another viable solution. Often, the primary account holder’s credit is checked, but additional lines may not require individual credit checks. This allows you to leverage another person’s creditworthiness to obtain service.
For post-paid service, some providers might require a security deposit, especially with a challenged credit history. These deposits typically range from $100 to $500. The deposit serves as assurance for the provider and may be refunded after a period, such as 12 months, of consistent on-time payments. While the Affordable Connectivity Program (ACP) previously offered significant discounts, it stopped accepting new applications as of February 2024 due to lack of funding. However, the Lifeline program still provides a smaller monthly subsidy for eligible low-income households.
Understanding Credit and New Service Applications
Traditional post-paid cell phone providers generally conduct credit checks when you apply for new service, particularly if financing a device. This allows them to assess the risk of providing service and equipment on credit. These checks help providers determine your likelihood of making timely payments.
Filing for Chapter 7 bankruptcy significantly impacts your credit score, making it more challenging to get approved for new post-paid contracts. A bankruptcy filing remains on your credit report for up to 10 years, indicating a higher credit risk. Providers may view a recent bankruptcy as a red flag, potentially leading to denial or a security deposit requirement.
Prepaid and no-contract options are designed to bypass these credit requirements, providing immediate access to service without a credit inquiry. If you seek a post-paid plan, being prepared to pay a security deposit can increase your chances of approval. While bankruptcy impacts your credit, it is possible to obtain cell phone service by choosing options that align with your current financial standing.