bankruptcybasics101.com

At first, it’s a relief—you file bankruptcy, and the creditors stop harassing you. Your phone stops ringing, you’re no longer afraid to pick up the mail, and the juggling act ends. You can devote your income to keeping up your living expenses and trying to get your financial life back on track.

But many people who file bankruptcy are worried about what comes next. They’ve heard rumors like, “You can’t get credit for ten years after you file bankruptcy.”

Naturally, when you’ve just filed bankruptcy, your credit won’t be strong. Of course, your credit probably wasn’t strong when you were dealing with the crises that forced you to file bankruptcy, so that’s nothing new.

Here’s what you can realistically expect after your bankruptcy discharge:

Unscrupulous creditors will likely flood you with offers of low-balance credit cards to help you “rebuild” your credit after bankruptcy. Unfortunately, many of these offers come with activation fees and membership fees that will push you near your credit limit before you’ve ever used the card…and then late charges and over-the-limit fees will kick in, putting you right back where you started: in debt, and with late payments on your credit. So what can you do? Choose your new credit accounts with care. There are reputable lenders who will give you a chance to re-establish credit after bankruptcy. Don’t get so eager that you abandon your better judgment.

After bankruptcy, you won’t immediately be able to qualify for most conventional mortgages, car loans, and the like. For most people who file bankruptcy and then pay their bills on time, however, those loans will be within reach 2-3 years after discharge. It’s not a quick fix, but it’s also a far cry from the ten years many people have been led to expect.

You’ll probably pay a higher interest rate for your first few loans or credit accounts—those rates are dependent on your three-digit credit score, and those scores will be low right after bankruptcy. However, negative items on your credit—even bankruptcy--have less and less impact as they age. More recent items will carry more weight, so make sure that you keep your current accounts current.