Life after bankruptcy: reestablishing credit and financial stability after Chapter 7 bankruptcy
By Barbara Craig, Attorney at Law
Far too many people confuse filing chapter 7 bankruptcy with a complete financial meltdown and an end to any hope for an existence without financial hardship and struggle. With a misunderstanding or misinterpretation of what chapter 7 bankruptcy actually involves, many believe that when filing for chapter 7, their life — or at least their financial life — may as well be over.
There are quite a bit of false information and inaccurate perceptions regarding the filing of bankruptcy and in particular, the financial options and opportunities available after having filed chapter 7 bankruptcy. But when used correctly, bankruptcy is a way to regain control of one’s financial future, rather than being the last step toward ending it.
Those who file chapter 7 bankruptcy might find it discouraging that new lines of credit or loans may not be immediately and readily available to them. Although there are exceptions to every rule and it is not absolutely impossible to obtain new credit lines right after a chapter 7 bankruptcy, individuals filing for bankruptcy protection should expect to wait 12 – 18 months before applying for new credit. And even then, interest rates they obtain are likely to be higher than average for 4 – 6 years post-bankruptcy.
Credit unions are an excellent choice for reestablishing credit after chapter 7 bankruptcy. Becoming a good customer of a credit union can greatly improve chances of obtaining a car loan, which is usually the first step in a process that can eventually lead to eligibility for a home loan. It’s possible to obtain mortgage financing as early as 24 – 36 months after discharge of chapter 7 bankruptcy.
Certain credit cards are available to those who have filed chapter 7 bankruptcy as well. The best strategy is to obtain only one credit card with a modest limit, never carry a balance of more than 30% of your credit limit, and always make payments on time. A consistent track record of responsible use will result in steady improvement of one’s credit rating over time, and can help restore your credit score to level comparable to, or even surpassing your score prior to your chapter 7 bankruptcy.
While it’s true that chapter 7 bankruptcy remains on an individual’s credit report for up to 10 years, it doesn’t necessarily prevent a person from reestablishing another credit history. Used wisely, chapter 7 is an alternative to financial turmoil and personal stress. With patience, time, and new spending habits, rebuilding one’s financial future and establishing a better-than-ever credit score is not only possible, but quite probable.
Are you wondering whether Chapter 7 Bankruptcy is right for you? Contact Attorney Barbara Craig to schedule a free bankruptcy consultation to discuss your individual financial concerns. South Bay Bankruptcy Attorney Barbara Craig serves clients in Torrance, San Pedro, Lomita, Harbor City, Carson, Wilmington, Long Beach and other nearby communities. Call or email now to schedule a convenient and private meeting in your home or office, or at our office.
Illustration courtesy 401(K) 2012