It’s no surprise that filing for bankruptcy will affect your credit score. After your bankruptcy discharge is awarded, you may see a drop of as much as 200 points in your score. Additionally, your bankruptcy will remain on your credit report for a number of years; Chapter 7 bankruptcies remain on credit reports for ten years and Chapter 13 bankruptcies remain for seven years.
Although bankruptcy will lower your credit score, it does not keep you from getting credit. You are still able to apply for credit cards, car loans and even mortgages. Your ability to get credit depends on a financial institution’s set of criteria, which may include factors such as how recently you filed for bankruptcy and how well you are maintaining your finances after filing.
Getting a Credit Card
You can apply for a credit card right after your bankruptcy discharge is awarded. In fact, you may start to get offers in the mail from credit card companies before you even request them.
These cards, however, will likely come with higher interest rates and lower spending limits. One great option is a secured credit card – these cards work the same way as regular unsecured cards but they require you to put a deposit down. The deposit acts as collateral and is returned to you after you close your account.
If you do decide to get a credit card, it’s important to use it wisely and pay your bill every month. This habit will help you rebuild your credit and keep you from facing further financial difficulty.
Getting an Auto Loan
Getting a car loan after bankruptcy may be difficult but not impossible. Auto loan dealers will review your financial history and base their decision on factors like how long ago your bankruptcy discharge was awarded and what your current credit and disposable income look like. It may be a good idea to obtain a credit card first and establish favorable credit for six to twelve months before trying to get an auto loan. As with any loan request, you should make sure to shop around and see what other companies offer before making your decision. Just because you have a bankruptcy on your credit report does not mean you don’t deserve the best deal.
Getting a Mortgage
It may take longer to get a mortgage after bankruptcy, but again, it is definitely feasible. There are different types of mortgages and different criteria established for getting these mortgages. For example, if you want to apply for an FHA loan and you have been awarded a Chapter 7 discharge, you will need to wait two years after your discharge was awarded before you apply.
However, if you had a Chapter 13 bankruptcy, you may be able to apply much faster and even possibly during your bankruptcy proceedings, provided the court will allow it and you show a history of completed Chapter 13 plan payments for a year. These factors are the same when applying for VA loans.
If you want to apply for a USDA loan, you will need to wait one year after a Chapter 13 discharge and three years after a Chapter 7 discharge. Applying for a conventional loan will take the longest. If you want to apply for a conventional loan, you must wait four years after receiving a Chapter 7 discharge and two years after receiving a Chapter 13 discharge.
It’s important to remember that the time periods mentioned above are mandatory and only cover one of the requirements. Financial institutions will likely want to review other factors including your credit history, your reason for filing for bankruptcy and the type for which you filed, and how good your credit is at the time you apply for the mortgage.
How a Cleveland Bankruptcy Attorney from LHA Can Help You
If you have more questions, you may want to speak to a qualified bankruptcy law firm to go over your options in detail. The Cleveland bankruptcy attorneys have the knowledge and experience to help you solve your financial issues and get your life back on track. Contact a Cleveland bankruptcy attorney today to discuss your options at (216) 586-6600 or email us at firstname.lastname@example.org.