Many folks believe that once you file bankruptcy, you’ll never obtain credit, or have to wait 10 years before you can borrow money again. This article will give you an overview of why these notions aren’t true.
Can you get credit after your bankruptcy discharge?
Yes, in fact many clients report getting credit card offers in the mail shortly after they file. However, the interest rates won’t be as favorable and the credit limits should be lower than what many borrows experienced in the last decade.
However, ask yourself why you need credit to begin with. You should focus on how to accumulate any leftover income in the form of savings or investments. I advise my clients to start saving enough money in the bank to cover their basic needs for three or four months before even considering borrowing any money, for any reason.
Will I be able to purchase a house after a bankruptcy discharge?
Yes. Most lending programs and data we’ve seen suggest that you can qualify for a home mortgage within 18 to 24 months after a bankruptcy discharge. However, your chances are improved if you have a stable income, a down payment, and little or no other debts. Again, bankruptcy helps by eliminating the very debt that may have jeopardized your chances for getting a home mortgage, had you applied before filing bankruptcy.
Is my credit record ruined by filing bankruptcy?
Your ability to borrow money, bankruptcy or no, has less to do with a credit score than your overall solvency. The more important question most lenders ask in our new economy is: does the borrower have more assets and income than debt?
Your debt-to-income ratio actually improves in most cases after filing bankruptcy which assists your overall credit profile. The bankruptcy event will remain on your credit for up to 10 years, but it isn’t the only factor that establishes your credit worthiness.
However, some lenders who are unfamiliar with bankruptcy may make a negative judgment about your application for credit.
What should I look out for on my credit report after my bankruptcy discharge?
The debts you listed in your bankruptcy will still remain on your credit report. Your bankruptcy should be listed, too, which will alert potential lenders that all discharged debt listed on your credit report is no longer legally enforceable. In plain language: your credit report should prove that your bankruptcy wiped out the legal claims of your old creditors, and that you have less debt than before you filed bankruptcy.
Our office recommends that you don’t use your annual free credit report to assist with the filing of bankruptcy, but to save the free annual credit report to clean up any errors on your credit report that may arise after you receive your bankruptcy discharge. I would allow at least a couple of months to pass before expecting the credit reports to catch up with the bankruptcy discharge.
Feel free to review a Summary of the Fair Credit Reporting Act to understand your rights when it comes to credit reporting.

