Getting Credit After Bankruptcy |
Cathy Moran
You may worry that you'll never get credit after bankruptcy, or that it'll take years to re-establish your credit. Neither is true.
Credit Cards
Most credit card companies will allow you to keep their credit card for use after bankruptcy if you agree to reaffirm the balance on the card and enter into a new agreement after the bankruptcy filing. Most creditors want to avoid not being paid in bankruptcy, and also want your future business. In fact, many people who have just been through bankruptcy are frequently solicited for new cards!
Getting New Credit After Bankruptcy
In today's competitive lending environment, credit is available to the recently bankrupt. It may be more expensive than before, and available with lower limits, but it will be offered. A secured credit card (one backed up by money in the bank) is usually available post-bankruptcy at lower rates than unsecured cards.
Of course, you should use credit cautiously and pay on time.
Buying A Home After Bankruptcy
Studies show that 18-24 months after a bankruptcy, debtors can qualify for a loan on the same terms as if they hadn't filed bankruptcy. The lender is more interested in your down payment, the stability of your income, and the relationship between the loan payments and your monthly income.
Effect Of Bankruptcy On Your Credit Report
Bankruptcy is no more harmful to your credit record than the financial facts that lead to the bankruptcy filing.
Most debtors in bankruptcy proceedings, even those who have never missed a payment, couldn't get new credit from a lender who looked at their financial condition. So the fact that there are no negatives on your credit report is only marginally meaningful.
Bankruptcy at least makes the debt shown in the negative history unenforceable. Objectively, you're a far better credit risk after bankruptcy than before. Subjectively, credit managers may not understand bankruptcy or look beyond its negative aspects.
A bankruptcy isn't going to remove the fact that you owed money to a creditor listed in your bankruptcy. Credit reporting agencies are within their rights in showing accurate history about your financial affairs. You'll want to correct any errors on your credit report and make sure that the bankruptcy discharge also shows on your credit report (so that creditors understand that those old creditors have no legal claim remaining).
Cathy Moran is a business and bankruptcy lawyer in the San Francisco Bay Area, and was one of the first bankruptcy specialists certified by the California State Bar. Her Web site Bankruptcy in Brief includes much information on bankruptcy.