Life After Filing Chapter 7 or 13 Bankruptcy

One of the many issues that people considering bankruptcy are concerned with is that they will never be able to be approved for credit after filing a Chapter 7 or Chapter 13. Or the stigma of having the bankruptcy staying on their credit report for 10 years from the filing. People feel that this would serve as warning to future creditors that that they may turn out to be a bad credit risk. But neither one is actually true, however. Although a bankruptcy filing will undoubtedly remain on your credit report for ten years, it definitely does not mean that you will never be approved any future credit.

Furthermore, only the Chapter 7 bankruptcy stays on your credit report approximately 10 years. If you filed a Chapter 13 Bankruptcy , you will discover that the period is shorter – around five to seven years. Now The Worst case scenario: You will be approved for a new loan but with higher interest rates or fees. You will soon discover that this is not all that bad . Especially after considering that even people with good credit can somehow wind up with bad loan deals as well. It’s a known fact that no matter how bad or good your credit line, it’s no guarantee that you are going to get approved for a loan or receive low interest rates. After all is said and done , a bankruptcy may actually damage your credit but only to an certain extent. This does not necessarily mean that you will never qualify and be approved for new credit. If there is damage afterwards credit can always be rebuilt. And this is something that we need to always focus on, as opposed to wallowing in the pits of a Credit Nightmare .

1 POSSIBLE TO DO : Keeping a zero balance Credit Card out of the Bankruptcy

When first filing for your bankruptcy, the rule is that you be required to create a schedule. A schedule is a listing of all assets and liabilities that you will be required under the law to disclose . This will be required before any commencement of the bankruptcy case. If money is owed on any credit card at the time of the initial bankruptcy filing , it will have to be included on that schedule .If this rule is not followed , you may be sued for perjury and penalized under federal law. What’s makes matters even worse, if you fail to disclose unpaid credits like this, you can be denied discharge of all your debts.

This rule, however, only applies to unpaid credit cards. So if no balances are owed on your credit card, then you are allowed by law to keep that card out of the bankruptcy. Also you are not obliged to inform the credit card company of the bankruptcy case. However, it is very possible your credit card company may still find out about the bankruptcy through other means. As a result they may still cancel your card as a precaution. Even if the credit card company gives you notice that the card is being cancelled there is no need to give up . Many credit card companies will allow credit card holders who intend to file for bankruptcy to maintain their credit card. This will occur on the condition that there is an agreement to reaffirm the balance on the card and thus a new contract is created . It is suggested that you try to re-negotiate the original terms with the credit card company and see if a settlement can be created that will be beneficial for both you and the company. While the final decision will be up to the creditors, always remember that their main objective is to avoid the loss incurred when the debt is discharged and to maintain your future business.

2 Being Approved For New Credit after Bankruptcy

It is one important thing to remember in today’s competitive lending environment, is that credit will always be available, even to the recently bankrupt. The downside ? You may find that credit may be more expensive than before and is available with lower limits. But all that is secondary to the fact that credit is available and you can have access to it. You will discover that one the easiest types of credit available to the recently bankrupt is the secured credit card. As opposed to an credit card that is unsecured a secured card, requires the applicant to deposit of a certain amount of money in exchange for a card that can be utilized just like a regular credit card. The credit limit will be determined by the amount of the cash deposit that has been made. It is also good to recognize, that a secured credit card is usually available post bankruptcy at a lower rate than a card that is unsecured .

What’s more significant is the fact that these secured credit cards are not often indicated on your credit report. With this being the case creditors have no way of discovering whether or not the credit card is secured They will only notice that you have been approved for a credit card, which will only somewhat increase your credit score and puts you back in the credit arena fairly quickly. It is important to note , that credit experts do not agree of the impact of secured credit cards on your credit rating. So if you do make a decision to open a post bankruptcy secured credit card, be certain to be careful . While being anxious to rebuild your credit is clearly understandable, making mistakes that could significantly harm your credit score is definitely not worth it .
Just remember that rebuilding your credit worthiness after bankruptcy is a matter of being re-established in the world of credit. You will discover that the balance is often precarious and needs to be treated in a delicate manner . You must learn to use credit cautiously and make timely payments .

3 Purchasing Real Estate after Bankruptcy

In fact, there is research that clearly show bankruptcy debtors can indeed qualify for a home loan on the same terms as a regular applicant .This is the case even if they had not even filed bankruptcy within 18 to 24 months after a bankruptcy discharge. Creditors are more concerned with your current financial status not your past financial troubles– e.g., your down payment, the stability of your income and your debt income ratio . That being said, it’s important to take note of the following items that you might want to do in preparation for your first home purchase post bankruptcy:
• When buying a home after bankruptcy, the important factor to consider will be the discharge date, since there is usually a waiting period of at least 2 to 3 years. It is important to understand that during the waiting period, you will be required to do two things: re-establish at least 4 lines of credit (auto loans or credit cards, for example) and maintain an outstanding payment history.
• You have to be certain that there are not any delinquencies on your credit report that should have been removed with the bankruptcy petition . If any are discovered , your creditors should be contacted immediately. A copy of your “Schedule of Creditors” should be included in your letter so that your creditors can be notified that the debt was included in the bankruptcy and update your credit report accordingly. .
• If your savings and checking accounts are pretty sound , the better and stronger your portfolio is going to look to a potential lender when you first apply for a home loan. Remember that the r ability to make a down payment bears great influence in your approval rating. If there is a substantial amount of money in your savings account, your creditors will naturally come to the conclusion that you have the necessary financial means to make a down payment.

Just remember that filing a bankruptcy is not the end of the world !