Myth #4: You Will Never Be Able To Get Credit Again
Quite the contrary. Filing bankruptcy gets rid of debt. Getting rid of debt puts you in a position to handle more credit, and this makes you look more attractive to would-be lenders. After all, lenders want to make money from you, and knowing that you can’t get another Chapter 7 discharge for 8 years and have no debt makes you look pretty good!
In my clients’ experience, once you get your bankruptcy discharge, you will be deluged with offers for new credit cards, car loans, etc. Back when people actually had equity in their homes, I had many clients refinance their homes a couple of weeks after they got their discharges, or even in the middle of their Chapter 13 cases. Even in the current tight money climate, assuming your post-bankruptcy credit is good and you have a good job, you’re eligible for an FHA-insured mortgage two years after your discharge.
This isn’t always a good thing. I don’t want you to get right back in debt again. At first, the would-be lenders will want more money down and will want to charge you higher interest rates and fees. However, over time, if you are careful, keep your job, start saving money, pay your bills, and do things that will put good marks on your credit report, your credit scores will get higher, and the terms you can get will improve. In my experience, if a client has not reestablished good credit in 2 to 4 years–sufficient to buy a car or even a house–it’s not because they filed bankruptcy. It generally means that something else has happened after the bankruptcy to hurt their credit.