Consequences Of Bankruptcy
Loans after bankruptcy are not as easy to obtain as before the case was filed, and it depends on what kind of loan a person is seeking just how difficult the process will be. Once a discharge of the Chapter 7 or 13 has been granted, the debtor must reestablish credit, and the first step will probably be a secured credit card. A secured card is given by the bank, and is secured by whatever amount of money the cardholder deposits in an account for that purpose. Charges are then limited to the amount deposited, which helps avoid running up too much debt again, but allows the positive credit experience to be reflected in one's credit report. This step helps make the debtor eligible for a loan.
One of the consequences of bankruptcy is that if the bankrupt person wishes to buy a house in the future, there will be a two-year wait after the Chapter 7 case is discharged before he will be deemed eligible for a home loan. When a Chapter 13 bankruptcy case is involved, the wait is twenty-four months after the debts are paid off in full. During that two-year period, the loan applicant will need to have been employed steadily, have no negative entries in his credit file, and kept debt under control. If a person is able to make a large down payment of 15% to 20%, there will be no problem getting a home loan. For less than that, the interest rate will probably be high. If a borrower has to get a loan at a higher rate, two or three years of a perfect payment record may make a lower interest rate possible through refinancing.
The recommendation for reestablishing credit is to establish credit with four creditors, including one or more secured credit cards. Stores and credit card companies will often allow people with bad credit histories to obtain credit from them, but the charge limits will be low, and the interest high. Another tip to improve the chances of loans after bankruptcy is to ask providers of gas heating, auto insurance, water, and phone service if they will give a clean credit reference letter to a post-bankruptcy customer after twelve months of on-time payments. Even though one of the consequences of bankruptcy is that the bankruptcy stays on one's credit record for ten years, these other positive events are certainly going to be helpful to a person's overall credit rating.
If all of this seems tedious and time-consuming, it is. People should know ahead of time that these difficulties are the consequences of bankruptcy. Another of the loans after bankruptcy that many people are looking for is a car loan. These are not so difficult to obtain. Again, high interest will be part of the deal. However, from a credit history standpoint, higher interest is much better than "high risk." Application for an auto loan post-bankruptcy can even be done online. The rules are simple: Applicant must be 18 years old; must make $1,400/$2,000 joint income per month; must have a valid drivers' license; and must have or be able to obtain car insurance. One thing doesn't change about buying a car, whether it's before or after bankruptcy, and that is the importance of checking with different dealers to find the best possible deal on a vehicle.
Consistent payment on a personal loan will be helpful in reestablishing credit. Once the bankruptcy case is discharged, personal loan options may include secured personal loans, unsecured personal loans, or lines of credit. The chances for approval will be greater if there has already been a move to boost the credit record with an excellent payback history on a credit card or auto loan. All of these things work together to prove to the lending institutions that although this person filed for bankruptcy, he can now be trusted to be on time with payments. Time and patience are absolutely necessary virtues in obtaining loans after bankruptcy.
While all of the creditors who are willing to issue credit cards or charge accounts will most certainly be charging a higher interest rate to begin with, the customer who proves to be reliable over time may ask for a lower rate. Asking certainly can't hurt, and may be a great help to one's future buying power. These consequences after bankruptcy are annoying. Everything is predicated upon the rock-solid commitment on the part of the person with bad credit to do everything in his power to make everything right again. Rock-solid commitment is required of us in faith, as well. Scripture reminds us to trust in God, not in things. "Some trust in chariots, and some in horses: but we will remember the name of the Lord our God." (Psalm 20:7)
Quite often the reasons for a person filing a Chapter 7 or 13 in the first place had nothing to do with irresponsibility, so the consequences of bankruptcy seem harsh. A serious illness or accident, or loss of employment, can wreak havoc in a family's budget. Keeping up with bills when income has ceased can be next to impossible, so the courts provide the only answer. In this kind of case, the individual responsible is not careless about his credit, so getting his reputation back and loans after bankruptcy will be easier than it will be for the person who just got too hooked on having more things until there was just too much to pay back. That habit is hard to break.
Life After BankruptcyLife after bankruptcy is like a road with a fork in it--one can choose to take the path that leads to better financial decisions and a more prosperous future, or take the path of repetition and be no better off than before. The point is, for most people who have filed for help under Chapter 7 or 13, it will be necessary to handle finances differently than in their pre-bankruptcy days, according to those who give financial advice after bankruptcy. When debts piled up out of "wants" instead of "needs" a change in attitude is absolutely necessary. However, when the process has resulted from personal tragedy, i.e., job loss, illness, or accident that has drained a person's financial reserves, the situation is quite different.
Financial advice after bankruptcy is available from more than one source. The attorney who helped to file the case in the first place would be the logical first choice for guidance. Where an individual filed on his own (not usually the best way, but for some it can be done), then finding an attorney who handles these cases would be a good beginning. In addition, there are a number of consulting companies who will help a person with financial problems without charge. Conservatism in financial matters is the logical first approach to regaining financial stability in life after bankruptcy. Separating what is needed from the wants in one's life can put things in perspective. Simplifying life helps not only on the financial level, but on the spiritual as well by relieving the stresses that come with money problems. Jesus helped his disciples not to rely on money for their security: "And commanded them that they should take nothing for their journey, save a staff only; no scrip, no bread, no money in their purse;" (Mark 6:8)
One unalterable fact that results from bankruptcy is that the proceeding stays on the debtor's credit report for ten years. Anyone the debtor approaches for credit will see that when they do a credit check, and many times it is enough to result in a turn down. There are ways to overcome that handicap. One thing that can be done is to get a prepaid credit card from the bank. Put in a given amount of money into a special account, have the bank issue a credit card up to that limit, and use it for purchases. This will help to re-establish a good credit record. Life after bankruptcy might also include getting a mortgage loan for extra cash for purchases. As long as the borrower is gainfully employed, this could give a person the "leg up" needed to begin the climb back to credibility where money is concerned.
Life after bankruptcy isn't altogether bleak. There are lenders that will look further than the legal proceeding to make their decisions on lending to someone who has taken that route. Car dealers especially, are often willing to work with post-bankruptcy customers because transportation is necessary for them to work. The drawback is, the interest will likely be a little higher than for the person who has a better credit record. Also, for things like clothing there are second-hand shops that carry some quality clothing for a fraction of what would be paid in the retail stores. Financial advice after bankruptcy will largely be a matter of taking a different view of the world. The kind of car one has been used to, and the clothes a person wears may have to be adjusted. Eating out may become a rarity, along with other sorts of entertainment.
If a person filed for relief because of job loss, financial advice after bankruptcy may come in the form of suggestions for classes that will prepare a person for a different line of work. These can be arranged without cost to the student under certain government and private organizations that work with various campuses, or student loans may be obtained that won't have to be paid back until the student is gainfully employed at whatever he has prepared himself for. Also included in advice after bankruptcy may be greater cooperation in the family. Where children are old enough to hold down part-time jobs, they can bring in needed cash. If a spouse has not been working, perhaps that will have to change. All of this will be temporary until the breadwinner is once again gainfully employed. Life after bankruptcy sometimes means difficult choices.
Americans have become so accustomed to living above their means through the use of credit that it's easy to understand how people wind up having to seek help through the court system. When debt reaches the level where no matter how hard the debtor works he cannot keep up with the burden, there is little alternative. Financial advice after bankruptcy can be an enlightened time if the debtor is successful in changing his attitude toward spending and saves more. This change in attitude, along with learning how to budget what is coming in constitutes the most important points stressed when someone offers advice. Finding a source for this kind of advice is not complicated. Attorneys are listed in most phone books, and of course there is the Internet search that is available to those having computers. No one has to face post-bankruptcy problems alone.