 One
of the issues that people considering bankruptcy often worry about is
that they will never get credit after filing a Chapter 7 or Chapter 13.
That, or the fact that the bankruptcy will stay in their credit report
for 10 years from the filing, which fact would serve as warning to
future creditors that you might turn out to be a bad risk.
But neither is true, however. While a bankruptcy
will indeed stay in your credit report for ten years, it does not
essentially mean that you can no longer get new credit. Moreover, only
a Chapter 7 bankruptcy will stay in your credit report within 10 years.
If you filed under Chapter 13, the period is shorter - about five to
seven years.
Worst case scenario: You can get a new loan but
with high interest rates or fees. Now, that's not so bad, is it?
Particularly after considering that even people with good credit can
get bad loan deals. The fact remains that no matter how bad or good
your credit line, it is not a guarantee that you are going to get
approved for a loan or get low interest rates.
In other words, a bankruptcy may damage your
credit but only to an extent. It does not essentially mean that you
will never qualify for a new credit. What damage there is, you can
always rebuild. And that is what you should be focusing on, instead of
wallowing in the pits of Credit Doom.
Keep a Credit Card out of the Bankruptcy
When filing for bankruptcy, the rule is that you
have to make a schedule. A schedule is a list of all assets and
liabilities that you are required under the law to disclose before a
bankruptcy case could commence.
If you owe money on a credit card at the time you
file for bankruptcy, you have to include that in the schedule. Or else,
you may be sued for perjury and penalized under federal law. What's
worse, if you fail to disclose unpaid credits like this, you may be
denied discharge of all your debts.
The rule, however, only applies to unpaid
credits. So if you do not owe any money on your credit card, then you
can go ahead and keep that one out of the bankruptcy. You are not
obliged to inform the credit card company of the bankruptcy case.
Note, however, that your credit card company may
still find out about it through other means and cancel your card as a
precaution.
If your credit card company gives you notice of
cancellation of your credit card, don't give up yet. Many credit card
companies allow their credit card holders who are filing for bankruptcy
to keep their credit card on condition that they agree to reaffirm the
balance on the card and enter into a new agreement.
Try to re-negotiate the terms with your credit
card company and see if you can settle for a circumstance that is
advantageous for both you and the company. While the decision is up to
the creditors, keep in mind that what they want is to avoid the loss
incurred when the debt is discharged and to have your future business.
Get New Credit after Bankruptcy
If there is one thing you can count on in today's
competitive lending environment, it is that credit is always available,
even to the recently bankrupt.
The catch?
Credit may be more expensive than before and
available with lower limits. But all that is secondary only to the fact
that credit does exist and you can get it.
One of the easiest credits available to the
recently bankrupt is a secured credit card. As opposed to an unsecured
credit card, in a secured card, you must make a deposit of a certain
amount of money in exchange for a card that you can use just like a
regular credit card. Your credit limit is equivalent to the cash
deposit you made.
Now, the good thing about a secured credit card
is that it is generally available post bankruptcy at lower rates than
unsecured cards.
What's more, the fact that these credit cards are
secured are not often indicated in your credit report so creditors have
no way of knowing whether your credit card is secured or not. All they
will see is that you have been approved for a credit card, which ups
your credit score a bit and puts you back in the game fairly quickly.
Note, however, that credit experts are not quite
in agreement concerning the impact of secured credit cards on your
credit rating. So if you do decide to open a secured credit card post
bankruptcy, be sure to do it slow.
While your rush at rebuilding your credit is
understandable, making mistakes that could considerably affect your
credit score like this is not worth it.
Rebuilding your credit worthiness after
bankruptcy is a matter of getting a toe-hold in the world of credit.
The balance is often precarious and needs delicate treatment. Use
credit carefully and pay on time.
Buy a House after Bankruptcy
Absolutely. Actually, there are many studies that
show bankruptcy debtors can qualify for a home loan on the same terms
as if they had not filed bankruptcy within 18 to 24 months after a
bankruptcy discharge.
You see, what the creditors are concerned here is
not your past financial troubles but your current financial status -
e.g., your down payment, the stability of your income and the
relationship between the loan payments and your monthly income.
That said, take note of the following things that
you might want to do in preparation for your first house purchase post
bankruptcy:
- When purchasing a
home after bankruptcy, the key is the discharge date, as there is
generally a waiting period. If your loan was an FHA loan, you generally
have a 2-year waiting period for that. For other conventional loans,
the waiting period is four years.
- Now,
during the waiting period, you need to do two things: re-establish at
least 4 lines of credit (auto loans or credit cards, for example) and
maintain an excellent payment history.
- Make
sure that there aren't any delinquencies on your credit report that
should have been cleared off with the bankruptcy. If you find any,
contact your creditors without delay. Include a copy of your "Schedule
of Creditors" in your letter so that your creditors can indicate the
debt was included in the bankruptcy and update your credit report.
- The
more money you have in your savings or checking account, the better and
stronger your file is going to look to a lender when you apply for a
home loan.
- Remember that
your ability to make a down payment bears great importance in your
approval rating. If you have money in your savings account, your
creditors will naturally conclude that you have the money to make a
down payment.
Get New Wheels after Bankruptcy
A common misconception people have after a
bankruptcy is that getting new credit like a car loan is virtually not
possible. Well, note that the word used is "virtually." That is not the
same as saying that you are certainly never going to qualify for a new
car loan. Because the truth is you can and you should, if you need to.
If you can get a house after bankruptcy, then
there is all the more reason for you to be able to get a car. In fact,
you can even start going through some dealerships as soon as your
discharge papers are in. Just remember that the interest rates are not
going to be cheap. Here are some tips to help you deal with that one
tiny tangle:
- Check with the
Special Financing Department: Most car dealerships have this special
financing department that handles would-be car purchasers who are going
through some financial trouble. Since these buyers would not be able to
qualify for a conventional auto loan, some dealerships are willing to
offer you a different deal to help you get that car you want and at the
same time overcome the hurdle of credit after bankruptcy.
- Credit
Unions: If you are a member of the credit union at your workplace,
contact them and see if you can get a car loan through them. Often,
credit unions offer lower interest rates than banks, which in addition
to charging you higher interest rates, may also require you to deposit
your paycheck directly with them. If your workplace does not have a
credit union, your neighborhood may have one. Some are available to
people based on organization or church affiliation, or even residence
in a particular community.
- Charities: Not
many people are aware of this but charities are in fact a good place to
look for inexpensive cars. You may have heard of charities that ask you
to donate your working or non-working cars to them. In order to raise
money, they repair these cars and sell them for a price that is
considerably lower. Try those charities found in your neighborhood and
see if they sell cars that are more along your price range.
Have a 700+ Credit Score Two Years after Discharge
You might find this statement suspect, which is
understandable really when you consider the many stories of how one
bankruptcy can thoroughly damage the credit rating you've been building
up for years. Expert after expert has said that new credit is near
impossible to get after filing for a bankruptcy.
Though, in almost the same breath, the experts
likewise say that it is not impossible to rebuild your credit
worthiness after bankruptcy. And this is bolstered by the fact that you
had good reason for the bankruptcy, such as unemployment, medical,
business failure, etc, and that you without delay took steps
re-establishing credit after receiving the discharge.
So why then, despite complying with these two
requirements, your credit score remains way below average? The answer
lies in your credit report.
Your credit report contains everything about your
finances. All of the information contained in your credit report, when
added up, result in your three-digit credit score. Therefore, any
errors in your credit report, such as a fraudulent credit line or a
debt that remains even though it was supposed to be discharged after
bankruptcy, can aversely affect your credit score.
Common sense tells you that if you correct these
errors and mistakes, you can improve credit score. Also, some creditors
make various inquiries into your credit report. This act could lower
your credit score. What's more, after a discharge, they are allowed to
make only one inquiry into your credit report. After that, you are
entitled to ask for $1,000 every time they look into your credit
report.
Make certain that your creditors are not making
any more inquiries into your credit report. Write them a letter
explaining that the debt has already been discharged. Include a copy of
the discharge order as well as a copy of the "Schedule of Creditors"
from your bankruptcy papers as proof that the debts have already been
discharged.
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The insurance companies offer very reasonable packages for the customers to get benefits by financing over different categories of insurances. The mortgages are also a kind of loan where the debtors have to submit his all property documentations till the payment of all loans along with the interest rates. The investment property is one of the fine investments of the financing departments for getting the gigantic shares of the profits.
The debt help programs are organized by the different social welfare organizers to provide debt relief to the individuals by giving the exclusive financial aids. The enforcement of debt collection practices is very helpful to check the illegal and unfair means of collecting the money for the bankrupts. The bankrupt loans are very supportive for the bankrupts in order to get rid of state of bankruptcy.
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