Getting a Loan After Filing for Bankruptcy
People in Cleveland often ask me whether or not they will be able to get credit or get loans after bankruptcy. For the most part, I believe that concerns about bankruptcy preventing you from being able to get loans are over-exaggerated, with two exceptions. I’ll explore some of these exceptions and I’ll show you which loans are easiest to get after filing bankruptcy as well.
Hardest Loans to Get After Filing for Bankruptcy
Post-Bankruptcy Home Loans
First and foremost, home loans are very difficult to get after bankruptcy. Mortgage brokers I know have said that most mortgage companies are looking for about two years of substantial, responsible credit usage after bankruptcy before they will even consider you for a loan.
The reason that home loans are so difficult to get after bankruptcy is that home loans are big loans and the foreclosure process is a very long and expensive one. Keep in mind, creditors, especially these days, do not want to take a risk on someone they do not feel 100% about. So, they really want to hedge their risk when giving out mortgage loans after bankruptcy.
Post-Bankruptcy Credit Cards
The other area where it is more difficult to get credit is normal credit cards from banks. Store credit cards like those from Best Buy and Home Depot are easier to get because those stores are trying to get you to buy their goods. However, unless your income is quite impressive, you are not going to be able to get a $10,000 unsecured credit card right out of bankruptcy.
Also, credit cards have high interest rates for a reason. With credit cards, the fact is that a lot of people end up not paying off their debt. You will have to work hard at rebuilding your credit to earn your way back into the credit card company’s good graces.
For more information, read my article, “How to Repair Your Credit After Bankruptcy.”
Easiest Loans To Get After Filing for Bankruptcy
Car Loans After Bankruptcy
Car notes are surprisingly easy to get after bankruptcy. In fact, you will probably be solicited by car financing companies about new auto loans before your bankruptcy is even over.
The reason why this is is that these are fairly low-risk loans for financing companies, and they come with a high interest rate. The loan company knows you can’t file for Chapter 7 bankruptcy again for another 8 years and has access to a complete snapshot of your financial life because that information is contained in your bankruptcy petition.
Furthermore, because you don’t owe any money to anyone anymore, the creditors don’t have to worry about you being garnished. They also don’t have to worry about them having to wait in line behind some other creditor before they can get paid.
In the worst-case scenario, if you don’t pay they will repossess your car, sell it at auction, and come after you for any remaining loan balance that could not be satisfied out of the proceeds of the sale. Obviously, this isn’t what you want to happen, but the point is that the creditor knows that, one way or another, they are almost certainly going to get paid.
Need Advice on Getting Loans After Bankruptcy?
Getting a loan after bankruptcy can sometimes be tricky and you may need someone to help you navigate this difficult landscape. If you’re looking for a home loan, you can find some good information here. If you still need advice, try reaching out to someone at your local bank.
If you need to speak with a Cleveland bankruptcy attorney, I offer free consultations to all my clients. Or, if you have any questions about obtaining credit after filing bankruptcy, please contact me at 216-526-0309 and I will answer those questions at no initial cost to you.
