You Can Get Credit After Bankruptcy

One of the fears of those considering bankruptcy is that they will never get credit after bankruptcy.  This fear is fanned by lenders and debt settlement companies who are trying to bad mouth bankruptcy.

Let me say it, with all the emphasis available:  Filing bankruptcy does not prevent you from getting credit in the future.

Immediately after a filing, you can expect credit to be more difficult to get, more expensive, and limited in amount.  But it is available.

While the fact that you filed bankruptcy stays on your credit report for 10 years, it becomes less significant the more time elapses.  In fact, you are probably a better credit risk right  after bankruptcy than you were before.

After your  discharge, there are fewer claims on your income stream.  Your debt-to income-ratio is better.  Your credit score may even improve.

The bankruptcy filing is like a cut to your skin:  it bleeds and hurts a bunch when you suffer the injury.  Soon, it scabs over, looks bad, but doesn’t hurt as much.  Then the scab falls off and the skin is healed.  There may be scar, but it, too, fades with time.

Two to three years after discharge, debtors are eligible for mortgage loans on terms just as good as those with the same financial characteristics who have not filed bankruptcy.  That is, in getting a home loan in the future, the size of your down payment and the stability of your income will be much more important than the fact you filed bankruptcy in the past.

There is no “right” to credit. Landlords and credit card companies are well within their rights to consider your financial history in their credit decision.    However, debtors are protected from discrimination in employment and governmental licensing  based solely on the fact that they have filed bankruptcy by provisions of the Bankruptcy Code § 525.

 

About the Author
 
 
Northern California bankruptcy lawyer Cathy is a 30+ year veteran of bankruptcy practice in the Silicon Valley. She is known for energetic representation of clients and her command of bankruptcy law.