Loans and Bankruptcy, Jing and Jang?

By: Melissa Kellett

Can finance coexist with a past bankruptcy? Is it possible to get a loan after going through a bankruptcy process? To answer these questions it is necessary to make clear what is to be expected after declaring bankruptcy and how its consequences will affect your life for the following years.

Filing for bankruptcy should only be a last resort. Its negative effects will be recorded into your credit report and will probably last up to 10 years diminishing your ability to get finance on good terms and sometimes even impeding you from borrowing money from traditional lenders and financial institutions for many years.

The bankruptcy process is very stressful unless you get a good lawyer to make things easier for you. You will have to give up most of your assets, even those who may have an emotional value for you and your ability to control your finances will be very limited for some time.

Loans And Credit Cards

Though bankruptcy may bring some relief to your debt problems, not all debts are discharged with it. For example, family obligations such as child support continue to be exactable and might be subject of legal claims. Nevertheless, almost the only loans that are not dischargeable are student loans.

Your loans and credit cards balances will be discharged. This may aid your debt problems but will affect your ability to get finance for many years to come. Only after two years you will be able to apply for loans and credit cards again unless you offer some sort of collateral and even then you will have to show a perfect credit history from the discharge day onwards.

Other Limitations

Bankruptcy implies other limitations too: Getting life insurance after bankruptcy is extremely difficult due to the high risk involved for the insurance company. Thus, just like you will have to wait and build a good credit score before being able to apply for a loan or credit card, you may also have to wait at least two years before you can get life insurance.

Getting a job might also be difficult after bankruptcy. Though unfair as it may seem, employers tend to think that someone who has gone through a bankruptcy process has little discipline and as an employee constitutes a higher risk for the company.

Getting Finance After Bankruptcy

But, is it possible then to get finance after bankruptcy? The answer is yes, but some other questions arise: When? How? At What Cost? As to the first question, unless you can provide collateral and a co-signer, chances are that you will not be able to get approved for a loan till after two years since the bankruptcy has been discharged.

In order to get a loan after bankruptcy, you need to make sure that your credit history from the day the bankruptcy is discharged onwards is impeccable, there must be no late payments or missed payments or any other delinquencies on the credit report whatsoever. A perfect credit behavior since bankruptcy is the only way to convince lenders that the reasons which leaded you to bankruptcy are not present anymore.

Getting finance will be significantly more expensive because there is a higher risk involved for the lender. However, if you make all your payments on time and finally pay off the loan in full, this will contribute to raise your credit score and let you get loans on better terms.

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