After Bankruptcy, Then What?

Once you file for bankruptcy, you'll have some credit matters to deal with. For some of these issues, you should consider them before filing, if possible. When you have a bankruptcy on your credit report, it will stay there for ten years. Unlike other credit, which drops off after just seven years in most cases, your bankruptcy past will follow you. It also will mean you can have credit trouble even if your credit score rises again. Bankruptcy credit report flags can cause serious credit problems for you.

Just a few years ago, it was relatively easy to get credit cards after bankruptcy, since lenders were willing to take a lot more risk, and poor credit risk customers could be charged much higher fees. After bankruptcy, a debtor's file would usually be wiped clean, so without other debts to pay, a debtor was considered worth at least a risk. That is not true today. Now that the economic crisis has hit mainstream America, with more people losing jobs, or having to deal with lots of debt piled up over the last five to ten years, creditors - banks and other lenders - are afraid to hand out credit the way they did in the past.

The same was true of loans after bankruptcy. While you might have had trouble getting an unsecured personal loan, you might have been able to get a car loan after bankruptcy, since borrowers are less likely to default if they need to have a car, and the lender could always get the car back if the borrower didn't pay. But today, even secured loans re difficult to get approval for after bankruptcy.

When a lender looks at your bankruptcy credit report, it might not be an issue of your credit score being low. Even before you field, it's likely that you were struggling to pay debt on time, and your score was already low. However, if you had paid off the debt, the effort to pay debt back looks better to a lender than walking into bankruptcy court and blowing away debts from multiple lenders at once. Even if several years go by and you're able to rebuild credit after bankruptcy, remember that you score is not the only thing the lender will look at. They will also see the bankruptcy itself, and that will count against you.

If at all possible, you should consider alternatives to bankruptcy before you file. However, once you have filed, you can still rebuild credit after bankruptcy, and even possible qualify for some credit. It can take a few years however, so you need to be patient. Work to repay whatever debt you still have, such as student loans, on time. Don't give up trying to find secured debt, like auto loans, even with bankruptcy on your credit report. Talk to your bank about setting up a small secured loan, where you put $1,000 in a savings account, and get a loan against that deposit, to establish good repayment history.