By Cara O'Neill, Esq.
Of course, it is good to plan on operating on a cash-only basis to prevent finding yourself in the same situation again. If you are employed and can demonstrate an income, it is possible to “rebuild” credit quickly and to regain access to credit for large purchases such as cars and homes.
Credit Cards after Bankruptcy
After bankruptcy, it is common for clients to receive offers for credit cards, and when you understand the reasoning behind it, it makes sense. The lenders know that your bankruptcy wiped out all of your dischargeable debt. This means you have more discretionary money to spend than you did before your bankruptcy. They also know that you can’t file a Chapter 7 bankruptcy for another eight years, and this means they have lots of time to collect by garnishing your wages if you don’t pay your bill.
Cautionary Point: Don’t make the mistake, however, of accepting low limit cards or cards that you secure with your own funds. These actually hurt your credit score.
Car Purchases after Bankruptcy
It is also common for clients to receive offers to finance new cars very soon after filing bankruptcy – and often at very desirable interest rates. The reasoning behind it is similar to the reasoning of the credit card lenders, with one notable and important exception: if you don’t pay for the car, the lender will repossess it. Since most people need transportation for work, they pay their car payment before other expenses making you a good risk.
Home Purchases after Bankruptcy
Some people worry that a bankruptcy will prevent them from purchasing another home. With the amount of bankruptcies filed as a result of our current (and ongoing) economic downturn, if true, even the remaining banks would go out of business. The standard waiting period for purchasing a home after bankruptcy is two years.
If a foreclosure is involved, the waiting period is anywhere from three to seven years depending on the circumstances. Given the ongoing real estate crisis in many areas, the wise thing to do may be to give it time and work towards saving a sizable down payment.