Have You Heard You Can’t Get Credit For 10 Years After Filing Bankruptcy?

05 Aug Have You Heard You Can’t Get Credit For 10 Years After Filing Bankruptcy?

Some people avoid filing bankruptcybecause they think they aren’t allowed to have credit if they file. Many are especially afraid they will never be allowed to by a house.

This is a myth. It is not true that people can’t get credit for 10 years if they file for bankruptcy.

  • Credit can be taken after filing a Chapter 7 case
  • Credit can be taken after completing a Chapter 13 case
  • Creditors are free to lend money, or not to lend money, to whomever they chose regardless of credit scores.

Just because you CAN get credit, doesn’t mean it is a good idea to do so. Remember that you just got out of debt and don’t want to make the same mistake twice.

That said, there is nothing in the bankruptcy laws that forbids people who have gone through (completely finished) bankruptcy from borrowing money, although if someone is in an active Chapter 13, they might be forbidden from borrowing money without court permission.

A bankruptcy filing will be listed on a credit report for 10 years, and it will affect credit ratings negatively.

  • Just like anyone with negative marks on their credit report, people who have filed for bankruptcy have to deal with a bad credit rating and will likely pay a higher interest rate, and have a harder time getting credit than someone with a good score.

Once a Chapter 7or Chapter 13discharge is entered, it is important that people work hard to improve their credit score. You should pull your credit report a little while after your case is done, and check what is reported. The safest way to pull your own credit report is outlined inthis article by Eugene S. Melchionne.

All sorts of people look at credit reports.

Some lenders or employers will see a bankruptcy and will want to see that some time has passed and the credit score improved since filing. It is possible that they may refuse to work with someone because of the filing and/or credit score.

Other lenders actually look for people who have filed bankruptcy because they know that people with bad credit ratings will pay more for credit. They also know that people who filed bankruptcy are limited in being able to file again in the near future, so if they lend them money the borrower probably won’t be able to file bankruptcy against the debt.

Some lenders realize that someone who just filed bankruptcy won’t owe many other creditors and are probably in a good position to make payments.

Filing for bankruptcy certainly won’t make a credit rating better, and it won’t “clean up” a report either. It will make it harder to get credit in one way, but it can also make it easier to start rebuilding credit since the discharged debts will no longer be reporting as late each month.

See also:

How Important Is Your Credit Report After Bankruptcy by Carmen Dellutri

Will I Ever Be Able To Get Credit Again by Dana Wilkonson

Filing For Bankruptcy Can Help My Credit Score? by Kevin Gipson

Will My Spouse’s Bankruptcy Hurt My Credit Score? by Carmen Dellutri

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Concentrating in Consumer Bankruptcy Law since 1988; Wake Forest Law School JD 1987 Law Office of Susanne M. Robicsek since 1993, Law Clerk to Judge Rufus Reynolds, US Bankruptcy Judge for Middle District of NC; Burns Price & Arneke, PA, David Badger and Associates, PA.

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