Can I Get Credit After Filing for Bankruptcy?
Feb. 24, 2021
Keep in mind that one of the major goals of bankruptcy is to give people a fresh financial start and give them the ability to approach the future with a more positive outlook on their lives. There is an old saying that the past is history, the future is a mystery, and right now is a gift. That's why they call it the present.
You can't change history, but you sure can live your present life in the best way that is possible for you, while creating goals to achieve so that you can have a much better future compared to what has happened in your past. Going through a successful bankruptcy often leads to feelings that there can and will be better and brighter days ahead for you and your family.
So do those better and brighter days mean that you will have better credit in the future? Well, it might be easier than you think to improve your credit in the future. Let's use an example.
Bill owes $40,000 in credit card debt, and he simply can't afford to pay any of it back. He hasn't been able to make a single credit card payment for 4 months. He has been told that he can wipe out all of this debt by filing a chapter 7 bankruptcy, he can still keep what personal property he owns, and he can also keep his home and his car as long as he keeps paying his mortgage and his car payment.
Bill decides to go for it. He hires an attorney, the attorney explains to him all of the benefits that he can receive by filing a successful chapter 7, and Bill decides to take the plunge. He believes his future life can be much better if he can legally rid himself of all of this debt.
Bill files chapter 7, and in 4 months he gets a discharge - all of his debts have been legally forgiven.
Bill is very happy, and he can envision much brighter days ahead, but he is wondering if he will ever be able to get credit cards again. He has had a pretty good job for the last 3 years, and he makes about $45,000 per year. He believes he can budget himself so that he will be able to pay credit card debt in the future, if they let him get one or two new credit cards. But he still wonders if this bankruptcy is going to prevent him from getting future credit cards.
Bill applies for one new credit card with Bank of America. He's praying that they will give him a chance, but some of his friends have told him that its very hard to get credit after bankruptcy.
Bank of America reviews Bill's application, and here is their perspective on Bill's situation:
Bill has had bad credit in the past, and when he filed his bankruptcy he hadn't paid a credit card for at least 4 months.
But now, Bill has obtained a bankruptcy discharge - his debts have been legally forgiven.
Bill now has no debt other than his car payment and his mortgage payment.
Bill has a good job and makes about $40,000 a year
Since having filed for bankruptcy, Bill has made his car payment and his mortgage payment on time every month.
4 months ago Bill had a ton of credit card debt, but now he's pretty much debt free. If we give him a credit card with a moderate credit limit, he shouldn't have any trouble making his payments. If we don't give him a credit card, then we don't make any money on him. He seems like a pretty decent credit risk, and we can charge him a little higher interest rate than some other people because of his bankruptcy, so why not give him a credit card.
We are pretty confident he will pay us, but if for some reason he doesn't, well then we can sue him, and when we win the lawsuit he can't file bankruptcy again that soon, so one legal way or another, we will get our money from Bill. We will even be able to get a wage garnishment of 10% against his gross salary, and we can freeze his bank accounts if he really wants to play hardball.
After analyzing all of this, the BOA board of directors agree that they will issue Bill a credit card. Bill is very happy, and he realizes he can now work on improving his credit score because he has been paying his mortgage payment and his car payment on time, and when he pays his credit card bill on time every month he figures his credit score will improve, which means he will be able to get more credit if and when he needs it. It sure looks like this is a win for Bill, and its also a win for Bank of America.
So this is an example of how and why most people can reestablish their credit in a fairly easy way after they have completed a successful bankruptcy.
There are many professional people who help bankruptcy clients reestablish their credit after they have gone through a successful bankruptcy. Most people should be able to finance a car right after they get their bankruptcy discharge, and I also know car dealers that are willing to help people finance a car even while they just recently began their chapter 13 or chapter 7 case. People also can usually qualify to get a mortgage and buy a house about 2 years after they have completed a successful chapter 7.
I have a friend who helps people buy and sell homes, and he has also developed a talent for helping people reestablish their credit. So if you happen to have a strong desire to establish your credit after a successful bankruptcy, we can introduce you to him, and hopefully he can be a great help to you.
So if you are considering filing for bankruptcy, and you are concerned about your future credit, well, it might be a lot easier than you think for you to get back on track, improve your credit score, and get credit with various credit card companies and other lenders.