It is a misconception that obtaining credit after filing for bankruptcy is next to impossible. Before we get into the details, your credit score should be one of the last things to worry about when making the decision to file for bankruptcy. This decision should be a sound one, taking the totality of circumstances into consideration, including your income, the amount you pay to your creditors each month, and the psychological toll of having a large amount of debt with little likelihood of paying it off.
Credit card companies are really good about marketing. They make you believe that a you have to have a good credit score in order to live a happy and successful life. You see it everywhere: television commercials, radio ads and whenever you apply for any kind of loan. They drill the idea into your head that only a good credit score will allow you to purchase that dream car or dream home and that the number one reason why your credit score will go down is bankruptcy. The credit companies force the idea that it is infinitely better for you to pay that minimum payment each month for the debt that will take you decades to pay off just to preserve that good score rather than to file for bankruptcy. The truth is, however, that if you file for bankruptcy, the credit card companies will, in most cases, get paid cents on the dollar or nothing at all.
There is no doubt that filing for bankruptcy will damage your credit score and that bankruptcy may stay on your record for up to 10 years, but the impact bankruptcy will have on the score depends in large part on what your score was before filing. If your score was low already, bankruptcy will not have much of an impact on the score. In fact, over time, it will most likely increase it. Why? Because bankruptcy gets rid of the toxic debt that prevents you from paying your bills on time, and thereby damaging your credit as a result. With a clean slate, you are more likely to pay your bills on time.
But can I get a loan or a credit card after bankruptcy? Yes, you can. It may be tougher and the rate may be higher, but banks do offer loans post-bankruptcy. In fact, many report that they start seeing credit card offers in their mailboxes shortly after obtaining their bankruptcy discharge. Many financial institutions offer secured credit cards where you can put down a couple hundred dollars, something like a deposit, and then you are able to use it as a regular card. If you make your payments on time each month, those payments will be reported to the credit agencies, raising your score. If you are planning on getting a car loan, you may consider having someone to co-sign on the loan. Again, the payments will get reported to the agencies which will have a positive impact on your score.
Again, filing for bankruptcy is not an easy decision to make. But the notion that you will not be able to get credit again after bankruptcy is simply false. Please contact our office if you are struggling with debt in order to obtain a competent evaluation of your financial situation.