Bankruptcy is defined as the legal process of erasing debt for individuals and/or businesses.
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Bankruptcy and Credit Card Processing

Bankruptcy is defined as a legal proceeding intended to allow individuals or businesses who are unable to repay their debts freedom, while also providing creditors an opportunity to be repaid.

If you or your business have filed for bankruptcy in the past, it may impact your ability to secure a new credit card processing account. 

Multiple factors are considered so each case needs to be evaluated by the credit card processor. 

Such factors include:

  • How recently the bankruptcy was filed
  • Whether or not the bankruptcy has been discharged or if debts are still owed
  • What was the nature of the bankruptcy (amount, details of the situation, etc.)

No matter what the circumstances, filing for bankruptcy is not seen as favorable and will lead to additional requirements for a credit card processing account. 

Due to the nature of the account, your business will likely be considered high risk by any processing company.

High risk accounts are subjected, usually, to higher rates and fees when compared to traditional accounts. There may also be additional stipulations.

For example, the credit card processor may require a capital reserve on the account. This helps to mitigate their risk. In the event there are outstanding chargebacks that the business is unable to pay, the capital reserve can be used to fulfill these obligations.

Another example could be a transaction limit. This may place a cap on the volume of transactions your business is able to process in a set time. 

Again, these measures are taken to help protect the credit card processor from risk in case your business has to file for bankruptcy again.

Some processors may charge an application fee for high risk accounts that have previously filed for bankruptcy. This is due to the extra administrative work required to analyze the business account. 

The good news is that most processors may return that fee if the account is not approved. 

Instead of an application fee, some credit card processors may impose an approval fee that only gets assessed in the event your account is approved. 


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