What Happens After You File for Bankruptcy

Filing for bankruptcy is a major financial decision that will have ongoing consequences in your life. It doesn’t have to mean the end of your financial life. Many people file for bankruptcy then go on to buy homes, cars and get credit cards. Understanding what life is like after you have filed for bankruptcy will give you the insight you need to make the right decision about your finances.


You Will be Offered More Credit


One of the things that surprises a lot of bankruptcy filers is that they are bombarded with new offers of credit. This happens almost immediately after their case is discharged in the courts. The reason for this is because you will not be able to file bankruptcy again for another 10 years, so creditors know they have a good chance of getting their money if you take out a new loan.


While getting new credit will definitely help you to re-establish a credit profile, take it slow and be cautious when getting new credit. Resist temptation to get every credit card you are offered, and work slowly to rebuild credit.


Buying a Home is Possible


Most people think that you can no longer buy a home if you file for bankruptcy. While bankruptcy does adversely affect your credit profile, you can still buy a home. The key is to rebuild your credit over 24 months and have a perfect record of on-time payments and responsible use of credit.


If you are looking to buy a home, a good place to start is with FHA loans. These government-backed loans are easy to get, even if you have had past credit problems. All you have to do is show a 24 month history of on-time payments on credit accounts, and sufficient income to pay the mortgage. Getting a conventional mortgage may be more of a challenge in the first years following your bankruptcy, so it pays to wait it out for a few years and rebuild credit.


Bankruptcy is Not Permanent


While a bankruptcy filing will show on your credit report or any other public record, it will not stay on your report forever. After 10 years, all listings of bankruptcy are scrubbed from your credit report, raising your score and giving you better access to credit. If you have filed for Chapter 13 bankruptcy, it will disappear from your credit report after seven years. The good news is that your bankruptcy will lose much of its weight as time goes on, even though it still appears on your credit report.


Check Your Credit Regularly


In most cases, experts recommend checking your credit twice a year. After bankruptcy, however, it’s important to check your credit report monthly for at least the first six months. While you may have included all of your creditors in your petition to the court, there may still be creditors who are demanding payment of your discharged debts. You are not required to make payments on any debts that were discharged in the bankruptcy, so monitor your credit to ensure that your report is accurate.


When you file for bankruptcy, you are getting a fresh start for your finances. After you have had all of your debts discharged, you may find that it is easier to buy a car, get a credit card or obtain credit. With time, the severity of your bankruptcy filing will decrease, and your credit score will gradually get higher.

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