Books on bankruptcy
Credit after bankruptcy
Those considering bankruptcy frequently worry that they will never get credit after a bankruptcy, or that it will be 10 years before they can get credit. Neither is true.
If you owe money on a credit card at the time you file bankruptcy, you must list the card as a debt. Remember, the schedules are filed under penalty of perjury: perjury in connection with your case can lead to denial of discharge of all of your debts. It is also a federal crime.
If you don't owe anything on the card, you don't have to give the credit card company notice of your bankruptcy. Note, however, that they may find out through other means and cancel the card as a precaution. American Express is notorious for this.
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, signed after the bankruptcy filing. The decision is up to the creditor, but most creditors want to avoid the loss incurred when the debt is discharged, and want your future business.
Our experience is also that newly discharged debtors are frequently solicited for new cards!
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 is usually available post bankruptcy at lower rates than unsecured cards.
Rebuilding credit worthiness after bankruptcy is a matter of obtaining a toe-hold in the credit world and treating that credit with respect. Use credit cautiously and pay on time. Improving your credit score.
Before plunging back into the credit world, consider the extent to which easy credit lead to a bankruptcy filing before you sign up for new cards.
Absolutely. Studies show that 2-3 years after a bankruptcy discharge, bankruptcy debtors can qualify for a loan on the same terms as if they had not filed bankruptcy. That means that the lender will be much more interested in your down payment, the stability of your income, and the relationship between the loan payments and your monthly income than your past financial troubles. The tumultous financial times we are living through may upset the usual "rules" on credit.
In my opinion, bankruptcy is no more harmful to your credit record than the financial circumstances that lead to the bankruptcy filing. I believe it is much more important for your future financial health to look at your net worth (assets minus debts) than at your ability to borrow in the future.
Most debtors in bankruptcy proceedings, even those who have never missed a payment, couldn't get new credit from a lender who truly looked at their financial condition. So the fact that there are no negatives on their credit report is only marginally meaningfulwhen looking at the whole picture.
Bankruptcy at least makes all the debt shown in the negative history unenforceable. Objectively, a debtor is a far better credit risk after bankruptcy than before. Subjectively, credit managers are individuals who may not understand bankruptcy or look beyond its negative aspects.
Remember that a bankruptcy is not going to erase the record of your debts listed in your bankruptcy. Credit reporting agencies are within their rights in showing accurate history about your financial affairs. You want to make sure that the bankruptcy discharge also shows on the credit report so that creditors understand that those old creditors have no legal claim remaining. Correct any errors on your credit report.
The point of bankruptcy is to be able to SAVE after bankruptcy, not necessarily BORROW again.