Many people believe that filing bankruptcy will interfere with their ability to obtain credit not just in the near future, but in the long term. This is another myth of bankruptcy. Banks, credit card companies, and other lenders promote this myth because they think it will dissuade consumers from filing bankruptcy. However, filing bankruptcy wipes the slate clean and gives you a fresh start. Most people who file bankruptcy start their new financial life debt-free and quickly rebuild their credit in just a few years, if not sooner.
Federal law limits how frequently someone can file a bankruptcy case. Another myth of bankruptcy is that you can only file once in a lifetime. If you receive a discharge in a chapter 7 bankruptcy case, the law says that you cannot file another chapter 7 bankruptcy case for eight (8) years. Lenders are fully aware of this limitation.
Lenders are also fully aware that other than debts that may not have been discharged in your bankruptcy case, such as student loans, you have no debts and, therefore, no pre-existing monthly payment obligations immediately after receiving a bankruptcy discharge. All of your disposable income is available to make monthly payments on any new debt.
Of course, since you filed bankruptcy, any initial credit offers that you receive may have interest rates that are higher than normal. Is it worth it to pay a higher interest rate than someone with perfect credit and no bankruptcy on their record? If it will help restore your credit, the answer is yes.
Remember that you have some bargaining power and can afford to shop around for the best available offer. You are not in a position where you need to accept an offer from the first credit card company that offers you credit. Many of these cards will have annual fees.
You may want to start with a secured credit card, which is an excellent tool for rebuilding your credit score while keeping your debt level at a manageable amount. Why? Secured credit cards require a security deposit, which also functions as your credit limit. This should also allow you to get a lower interest rate than you would for an unsecured credit card.
If you need to buy a car after filing bankruptcy, shop wisely and buy something that is reasonably affordable with good mileage. Just because you may have the opportunity, do not buy something unnecessarily extravagant that requires you to make high monthly payments.
Once you receive a new credit card, whether it is a secured or unsecured card, use it wisely but regularly. Only charge what you can pay off at the end of the month to keep the balance from accumulating. Making timely regular payments will build your credit. A consumer’s payment history significantly affects your credit score. For the period after your bankruptcy case, keep the debt amount on an account well below the credit limit. Watch your debt-to-income ratio closely from month to month. This also can substantially help rebuild your credit and increase your credit score.
The experienced attorneys at the Morrison Law Group can help you determine if filing a Chapter 7 bankruptcy case is right for you. We work with clients during and after their bankruptcy case to ensure that they truly receive the best fresh start possible. We are Utah’s only statewide bankruptcy law firm and serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.
The Morrison Law Group’s website contains everything you need to help anyone file a bankruptcy case in Utah. The offices of The Morrison Law Group are open from 8:00 a.m. to 5:00 p.m. Monday through Friday. We can help you and any Utah resident file a bankruptcy case from the comfort and safety of your home. We have convenient locations in Ogden, Logan, Sandy, Orem, and St. George. Call 801.456.9933 today to schedule a free consultation.