There are many mysteries surrounding bankruptcy. Will I lose my home or car? Do I need to be completely broke to file? These are just a few of the questions that many people have. Another common inquiry regards the possibility of obtaining credit after bankruptcy. While it is a possibility, you should know that applying for credit this time around will be a little different than before you filed for bankruptcy.
The Bankruptcy Process
When you file for Chapter 13 bankruptcy, you are restructuring your debts to make them more affordable, which is why it is also known as reorganization bankruptcy. You are given three to five years (depending on your income) to repay your debts, and during this time, the court sets a dollar amount for you to live on throughout the bankruptcy process. A court-appointed trustee divides the remainder of your income among your creditors each month.
You are also unable to take on any more debt without the court’s permission. At the end of the process, you’ve paid off your debts and your money is yours again, but the fact that you declared bankruptcy remains on your report for ten years from the date you filed. The same is true with Chapter 7 bankruptcy. Although a vast majority of your debt is written off and the salary you make is yours, you must still deal with the woes of having a bankruptcy on your credit report.
Obtaining Credit After Bankruptcy
Although possible, obtaining credit after bankruptcy is difficult. Your credit score, which was probably on the decline before you filed for bankruptcy, has taken a noticeable hit. Lenders and credit card companies see you as a high-risk applicant because some of your debts have either been charged off or written off.
As you shop around for a creditor who is willing to trust you, you’ll likely get denied often. When you do get approved for credit, expect high-interest rates and numerous fees, but don’t let this deter you from your goal. The best way to build trust with a creditor is to consistently make on-time payments or even early payments that are greater than the minimum payment allowed. As you do so regularly, they’ll likely increase your limit and lower interest rates over time.
Do not let bankruptcy fears keep you from making a necessary financial decision. The bankruptcy attorneys at E. Orum Young Law Offices have filed the most bankruptcies in Northeast Louisiana in over 35 years. We understand that every case is different and approach each one with that in mind. If you are ever dissatisfied with the result of your case, our Trial Guarantee ensures that we will take your case to trial. Contact us today for a free case evaluation.
