Loan After Bankruptcy

Bankruptcy is a devastating event in anyone's life and it is important to remember that it does not have to mean the end of your good credit forever. Depending upon the bankruptcy chapters, your credit score can be restored in a reasonable time. It is possible to get a loan after bankruptcy discharge, you just need to proceed carefully to rebuild your credit.


It is possible to get a loan modification while in Chapter 13 bankruptcy. Many lenders have been attempting to reduce the amount of foreclosures, working in conjunction with the bankruptcy department. In order words, the bank does not want to see you lose your home, they would rather modify your loan and see you keep making your payments, rather than foreclose. One such loan modification may be fixing the interest rate if it is a variable one.

A loan after bankruptcy is not out of reach. Bankruptcy is not forever. Although a bankruptcy can legally remain on your credit report for up to ten years, it's effect on your credit score will start to diminish over time. You will need to adopt responsible credit habits, for example, paying your bills on time and utilizing a small amount of credit and ensuring that you do not carry a balance on any credit cards.

If your problem is overspending, you may consider creating and sticking to a budget. This includes establishing and saving money in an emergency fund. A common problem that people face when emerging from bankruptcy is that their credit reports may show certain accounts as being open and overdue when in fact they were closed and the obligations were wiped out with the bankruptcy. This means that you may have to do a little bit of work on your own and contact the credit bureaus to ensure that the accounts shown as outstanding have been properly displayed and reported as included in bankruptcy.

One of the more serious penalties of bankruptcy and getting a loan after bankruptcy is that you can expect to pay higher interest rates than the average borrower. This is because you are seen as a higher risk to repay the loan and this will automatically translate into a higher interest rate on any loan or mortgage that you qualify for. If you can work on building your credit up after bankruptcy by spending small amounts of credit and then repaying them immediately when they are due, this will vastly improve your credit score.

Getting a loan after bankruptcy is not impossible. It can be done if you work towards repairing your credit slowly and proving that you have every intention of repaying your bills from after bankruptcy and forward. The problem that most credit companies see is that some (not all) people who claim bankruptcy tend to do it more than one time as a means to running up credit and then walking away from it without repaying. This translates to higher interest loans for anyone who has been in bankruptcy, even if it was the only time they claimed bankruptcy.