Bankruptcy

Many borrowers that are suffering through financial troubles as a result of too much debt see bankruptcy as an easy way of getting rid of past mistakes and getting a new start. Yet, while there are circumstances where bankruptcy is actually the only (or preferable) approach to handling massive debt arrears, it is not a financial decision to be made lightly.

While you might have the willpower to keep away from those department store and similar high-interest credit cards for good, chances are there may still be times in which you'll need or desire additional credit. Whether it's buying a home, purchasing a car, leasing, renting; all these situations involve your credit, and there are few things worse on your credit history than a bankruptcy will.

Whenever a financer is deciding on if they should provide credit to someone, they will primarily look at the ability of the customer to make regular payments based on information from 3 things; present income-to-debt ratio, how stable their finances are, and their history of payments. With a bankruptcy scar on your credit history, your stability and financial history are not going to look the best to anyone.

Your credit report(s) can include information on your filing bankruptcy for as many as ten years following filing/discharge. While it is undoubtedly possible to attain credit following a Chapter 7 or 13, assuming your credit history is what your ability to acquire credit is based off of, it can be very hard if not unachievable in many situations. If and when you do begin to repair your credit, you'll find yourself paying "high risk" interest rates on anything and everything from mortgages to car loans.

While it is certainly not impossible to attain a home loan after having filed for bankruptcy, it might be more difficult. Private mortgage companies will place the applicant under considerable scrutiny unless the bankruptcy is from a long time ago and your credit has been excellent ever since. Even then, it can be hard to get the same rates as someone with the same credit score and a clean financial past.

FHA loans usually require the applicant has already established at least 2 other credit accounts from the time of filing for bankruptcy, that should be kept in perfect standing. The person borrowing should also wait a period of at least two years after discharge for Chapter 7's or at least one year after Chapter 13's.

A mortgage loans traditionally require a 2 year span of solid credit following discharge also, although special situations can be taken into account.