If you’re afraid to file bankruptcy, you’re not alone. Most of the people we talk to say they’re scared they’ll never be able to get credit again.
And they say it because they’re aware that it’s very difficult to function without credit in our society.
Fortunately, we don’t have to hesitate when we say that getting credit after bankruptcy is more than possible. Let’s look at the three types of credit you’re most likely to need, and what is likely to happen after your discharge.
It will be hard to believe, but you’ll start seeing credit card offers about 1 week after your discharge.
Some of them will be offers for secured cards. Some will have high interest rates or punishing APRs. But you’ll get them.
Note it’s not always smart to take advantage of these offers right away. Get used to living without credit cards first. Restructure your finances and make payments into an emergency fund instead.
As time passes, the offers will get a little better, too. It might pay to shop for the cards yourself. Many credit card companies don’t send offers. Quite a few will still say, “yes” to your application.
See also: 8 Myths About Bankruptcy in NYC.
The car loan offers will come around the same time the credit card loans do. Again, you’ll want to be careful. These will carry high interest rates you might not want to get involved with.
If you still have a car that works, keep it and don’t get a new one for awhile. A steep car payment may be the last thing you need.
Just rest assured the car loan will be there when you need it. Be prepared to comparison shop so you make the right deal when the time comes.
Why are credit card companies and car finance companies so eager to lend?
First, because your credit score is likely to be higher after bankruptcy than it was during the bankruptcy. Each outstanding collection agency account was dragging your score down.
So were all the open, unpaid, maxed out accounts.
Bankruptcy wiped this slate clean. Now there are no outstanding loans or credit accounts on your credit report, except perhaps for student loans. If you filed Chapter 7 and reaffirmed the debt, you might have house debt too. That’s it.
Second, because it’s going to be years before you’ll be allowed to file bankruptcy again. These companies are feeling confident they’ll get your money. And you’ll want to take that into account when all those early offers start rolling in.
Be strategic about rebuilding your credit profile after bankruptcy. Get yourself into a position to get the best offers possible.
Home loans are a little trickier.
But in general you can get a home loan two years after bankruptcy if you’ve kept your credit clean, have enough income to support the loan you want and have held your job for two years or more. There are some companies that won’t even make you wait two years.
There are many mortgage lenders who are bankruptcy-friendly. There are no mortgage lenders who are foreclosure-friendly, which means filing bankruptcy to avoid foreclosure makes sense.
If you lost your house in the bankruptcy don’t worry. You won’t have to find two years to find a place to live. Plenty of landlords will lease to people who have filed for bankruptcy in the past.
Got more questions?
Still trying to decide whether bankruptcy is right for you?
Call the Law Offices of Michelle Labayan today. We can take a look at your unique financial situation. Together, we can determine whether bankruptcy is a good call.