A common concern for those considering bankruptcy is whether they will ever be able to buy anything on credit after the case is over. Generally, the negative effect of a bankruptcy filing on a credit report is in the first few years after the case is filed. After 10 years, the bankruptcy filing is removed from the report, but most debtors can obtain credit for small and large purchases long before the 10 years passes.
While a credit score does decrease after a bankruptcy filing, it can start going back up almost immediately if the debtor practices good financial habits, and continues to pay on one or more secured loans.
It is also possible to increase a credit score with a secured credit card obtained after bankruptcy. Some debtors even get offers for unsecured cards right after the case concludes. Many creditors will seek out potential customers that have just filed bankruptcy because they no longer have unsecured debt, and they cannot file another case for eight years (if they filed Chapter 7).
If a debtor is behind on credit card payments or other debts, and they choose not to file bankruptcy, the credit damage can often be just as bad as filing a bankruptcy if the strategy does not work. If the accounts remain delinquent long enough, the creditors will eventually file lawsuits, obtain judgments and try to collect. Judgments also remain on a credit report for 10 years. If a debtor does not file bankruptcy and they have a lot of unpaid debt, credit can get even tighter than if they filed bankruptcy because the potential lenders/creditors will know that the prior debts are still there and the possibility of a future bankruptcy is still there.
It is true that different lenders view bankruptcy in different ways. Some have no problem with a past bankruptcy filing, and others will avoid bankrupt debtors altogether. Anyone with debt problems will likely have to research lenders a little more aggressively to get reasonable rates and find a willing lender whether or not they file bankruptcy. Employment and the ability to make down payments will also factor in to any request for loans or credit.
Ultimately, many bankruptcy debtors have found it easier to get loans and credit a few years after their bankruptcy filing than it was before they filed depending on their individual circumstances.
For more information or a consultation, please call 661-210-5657, or e-mail mjf4bk@ca.rr.com.