There are many myths associated with filing for bankruptcy, most of which are not surprisingly perpetuated by creditors and bill collectors.  One of the most common myths that people believe is that a bankruptcy action will prevent them from qualifying for a bank loan, credit card or mortgage.  What many people fail to realize is that filing for bankruptcy is one of the first steps that they can take to restore their credit.   Especially for those that have extremely low credit scores, the only thing they can do is to file for bankruptcy and start rebuilding their credit.

            In fact, many people who file for bankruptcy receive solicitations from credit card companies once their debts have been discharged.  The reasons for this are threefold:

  1. People emerging from bankruptcy actions often have most if not all of their debts discharged, which immediately decreases their debt to income ratio.  Therefore, credit card companies often target them because they can more easily afford to take upon new debt.
  2. Credit card companies know first-hand that once someone files for Chapter 7 liquidation bankruptcy, they will not be able to avail themselves of this action for another 8 years.  Otherwise stated, a creditor knows that they are at a much lower risk of facing another bankruptcy action with the same person since they cannot file again for a very long time.
  3. Credit card companies know that once an individual or corporation’s bankruptcy case is complete, they will likely need additional sources of money to get themselves up and running again. Thus, debtors are often perfect candidates for credit card companies, who often view them as lucrative targets for new credit.  As a result, credit card companies offer various options for those seeking credit after filing for bankruptcy.

There is also good news for those that wish to finance the purchase of a home. Specifically, people who complete a bankruptcy action are able to obtain reasonable interest rates for a conventional mortgage within a year or two after their case is finished.   However, it is important to keep in mind that a large amount of debt can sometimes preclude someone from being eligible for a mortgage for a bit longer than two years.  Regardless, as more time passes, the less a person’s large amount of debt will be considered against them when applying for a mortgage.

For more information on the above or if you are contemplating filing for bankruptcy, contact my office today for a free consultation.  I will take the time necessary to answer all of your questions and help you determine whether filing for bankruptcy is right for you.  Even if you do not qualify for bankruptcy, I will advise you as to all of the alternative ways in which you can address your debt.