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Life After Bankruptcy

Clients often ask how they will feel after bankruptcy. The answer is… relieved. There is nothing better than the peace of mind of not worrying. Bankruptcy can stop the worrying. Here are a few frequently asked questions regarding life after bankruptcy.

Will I be able to get a credit card after bankruptcy?

Yes.  For most, credit scores improve after a Chapter 7 or Chapter 13 bankruptcy. Coupled with the fact that a person cannot file a Chapter 7 for 8 years after a prior case discharge is obtained, bankruptcy debtors are great potential customers for credit cards. There once was a time when credit card companies waited until debtors obtain their discharge before they solicited the clients for new cards. Now, the credit card companies are more aggressive and start soliciting while a debtor’s case is still pending. Clients can always obtain a secured credit card, which looks just like a credit card, but acts like a debit card.  The client needs to deposit money into the account, before charges can be made.

Will I be able to rent a home after bankruptcy?

Yes.  Again, once a debtor obtains his or her discharge, the credit score usually rises. Landlords are most interested in making sure that a potential tenant has not defaulted on residential leases in the past. Renting a new apartment is usually not an issue. In the worst cases, a client may have to obtain a co-signor on the lease or provide a larger security deposit.

Will I be able to buy a new car after bankruptcy?

Yes. Once you get a discharge. In fact, there are lenders who advertise that they will lend to a former bankruptcy debtor. Debtors can obtain a new car loan in a pending Chapter 13 case as long as the loan payment is within their budget and they are current with payments to their Trustee.

How Will My Credit Score Be Affected by Bankruptcy?

For most clients, their credit score will rise. There is nothing worse on a credit score then a foreclosure or repossession. Also, a big component of credit scores is how much debt one has. Once the bankruptcy discharge is obtained, the amount of debt shrinks, rapidly increasing the credit score.

How Can I Improve My Credit Score After a Bankruptcy Discharge?

Obtain a credit card and use it for small purchases every month and pay it off the balance on time every month. The credit score will then improve.

Will I be able to purchase a home after a bankruptcy?

After 3 to 4 years, yes. The look-back period for a conventional rate mortgage is 4 years. The look-back period for a F.H.A. mortgage is 3 years. Lenders are more concerned about your financial situation when you apply for credit, not what happened to you five years ago. In today’s real estate market most purchasers will need to deposit a down payment. Bankruptcy clients may need that time to save enough for the down payment.

Will my employer find out about my bankruptcy?

Generally no, an employer does not get notified of a bankruptcy filing unless you tell them.  While bankruptcy cases, like all legal cases, are public records, unless someone is specifically looking at the bankruptcy docket or conducts a credit check, the employer will not be notified.

Can my current employer fire or discipline me for filing a bankruptcy?

Absolutely not. It is unlawful for a current employer to discipline or fire a current employee for filing a bankruptcy.   See 11 U.S.C. §524.

Can a prospective employer deny me a job because of a bankruptcy?

It depends. It is unlawful for a government employer to deny a person a job because of a prior bankruptcy. So a public school teacher or police officer cannot be denied a job due to a bankruptcy. However, and this is rare, there is no prohibition on prospective private employers from denying employment based on a bankruptcy filing.

Will a bankruptcy prevent me from obtaining a government guaranteed Student Loan?

No. The law is clear. A lender cannot deny a government guaranteed student loan due to a prior bankruptcy or even whether a debtor is in a current bankruptcy.  See 11 U.S.C. §524.

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