FILING bankruptcy is something people hope they never have to do. The reality, however, is that bankruptcy is often the only means for people to be able to recover financially and start over. Sure, there are credit repercussions to filing bankruptcy but like other setbacks that you encounter in life, they can be overcome if you take the right steps. You may not know this but the recovery process can be as little as 3-4 years. It is unfortunate that very few bankruptcy attorneys give their clients at least the basic information they need to know to rebuild their credit after bankruptcy.
So you’re probably thinking: "How can banks and lenders trust me again if I have a bankruptcy on my record for 7-10 years?" Well, you may be shocked to know how many people receive invitations from credit card companies to apply for their cards even after bankruptcy. While is true that there are many credit card companies who are reluctant to give credit to people who have just filed bankruptcy, there are also a lot of companies that cater to those who have had past financial troubles.
For example, a lot of people do not know that even with a bankruptcy on your record, you could apply for a secured Visa or MasterCard. A "secured" credit card works just like any other credit card except that the bank requires you to pledge or deposit a certain amount (let’s say $500) as security for the account. Some banks match your deposit dollar for dollar and some give you 150% of the security. Example: If you send the bank $1000, they may give you a $1000 - $1500 credit line and keep your deposit in an interest-bearing savings account. Your new credit card works just like any other credit card and you can now use this card to make purchases, cash advances, etc. It will also appear on your credit report just like any normal credit card.
After some time, you can ask the bank to release the deposit to make the card "unsecured". If you get 2-3 of these secured credit cards and pay your bills on time, it shouldn’t take very long for you to start replacing "bad credit" with "good credit" on your credit report. I know this works because I have seen people rebuild their credit much faster using this method instead of doing nothing after bankruptcy.
It is even possible to qualify for a home mortgage shortly after filing for bankruptcy. Most people mistakenly think that they have to wait 7-10 years before they can make their dream of home ownership a reality simply because they filed bankruptcy. However, statistics show that people who file bankruptcy (or lose a home in foreclosure) often qualify for a mortgage within 2-4 years after filing bankruptcy as long as they have some type of re-established credit and if all credit characteristics are appropriate. What this means is that if your bankruptcy is a few years old, lenders are often more concerned about job stability, the amount of your income and your ability to make the required mortgage payments than they are with your past credit history.
So if you are thinking of filing bankruptcy and the effect on your credit is the only thing that is stopping you from going forward, think again. What you need to do is to have a long-term outlook and see the bigger picture. FACT: If you already have bad credit due to late payments, collections, lawsuits, etc. or if your credit is already "maxed out", you already have a tarnished credit rating anyway. After having counseled thousands of people in debt over the last 8 years, I have seen a lot of cases where filing bankruptcy does more good than harm. Don’t get me wrong. Bankruptcy is not for everyone but in a lot of cases, it may be the only sensible option in getting out of debt and rebuilding your credit. It’s only a beginning, not the end of the world.
If you need help in figuring out the advantages and disadvantages of filing bankruptcy, call my office at Toll-Free 1-866-477-7772 and schedule a free consultation.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped over 4,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772.
( Published March 13, 2010 in Asian Journal Los Angeles p. C2 )
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