How Bankruptcy Affects Your Credit?
Bankruptcy filings have a significant detrimental impact on the credit and one that will last for years. That’s how your creditors are never going to collect all the money you owe them, and they’re not going to receive any. To put it plainly, having a bankruptcy on your financial history makes it even more difficult for lenders to want to give you a new loan. And you should continue to pay higher interest rates and penalties when you are willing to open a new credit card account than someone who does not have a bankruptcy in their financial history.
Both of your loans are removed in a chapter 7 bankruptcy, but the record of your filing lasts for up to 10 years on your credit sheet. Your loans will be restructured with a Chapter 13 bankruptcy filing and you will pay down a part of them within three to five years. This form of bankruptcy is less detrimental to your reputation, and for up to seven years, it will appear on your credit history.
Getting a Credit Card After Bankruptcy
Checking your credit history and credit score is the first move to obtaining a credit card following chapter 7 bankruptcy because you know where the credit stands as you study the criteria of different cards. Maybe you’re not going to like what you see, but don’t give up hope. You may find that your credit score increases dramatically after a year of getting your bankruptcy dismissed by paying your bills on time and holding no, if any, debt. See “How to Create Credit After a Chapter 7 Bankruptcy” for more information.
Your best bet would definitely be protected credit cards when hunting for the perfect credit card. These cards operate much like regular unsecured credit cards, except that to access your account, they require the payment of a refundable security deposit. The deposit is also your credit cap, including security for your card issuer in case you avoid paying.
It will operate much like every other credit card until you collect your protected card. You will have to make a recurring deposit, and you will incur interest costs if you don’t settle the balance in full. A secured card’s value is that it typically has lower interest rates and fees than unsecured cards designed for people with poor credit.
Chapter 7 Bankruptcy in Hawaii
A chapter 7 bankruptcy in Hawaii will appear on your credit report for seven to ten years. And while you will face an uphill climb to re-establish your credit in the years to come, research tells us that this does not mean the end of your credit life for that span of years. In fact, as a Hawaii attorney, I will assure you it is astounding to discover how easy it is to ascend to that summit of good credit after filing bankruptcy.
This is primarily due to the fact that after bankruptcy you are, for the most part, debt-free and have fewer, if any, competing obligations for a new creditor’s monthly installment. Another factor is that you can’t re-file bankruptcy for four to eight years after your case completes, meaning that you can’t rid yourself of the new creditor for quite a long stretch. Creditors are often warming up their hands at the prospect of how much interest they will generate and for how long without the risk of their debt being eliminated in a second bankruptcy. That is good for many who file for chapter 7 bankruptcy in Hawaii, but there is an important warning there as well.
Obtaining a new credit card after bankruptcy is not difficult; in fact, many people who file bankruptcy are surprised to receive a flood of credit card and loan offers after the bankruptcy court enters the discharge. However, the University of Iowa Law Professor Katherine Porter writes that families who have filed chapter 7 bankruptcy appear to be particularly desirable future borrowers. In her article, The Credit Industry’s Business Model for Post-BK Lending, she comments, “Bankruptcy debtors seem to receive more credit solicitations than the general American population. Industry researchers report that the average American gets six credit offers each month. The average bankrupt receives sixteen, nearly three times the number directed to the non-bankrupt family. A carpenter in his mid-30s warned that once you filed for bankruptcy, lenders come out of the woodwork. For that reason, they just really try to get you back in debt again. All these offers that I get for financing before I filed I bet I could not get a loan. The ironic thing is I’m sure, say within the six months before I filed, they would have laughed at me if I wanted to get a loan. Now they are saying let us give you money.
Some debtors are shocked to discover that the very creditor who told them that filing chapter 7 bankruptcy would ruin their credit is now soliciting them as a customer. ‘I am continually getting offers for credit cards. Even the cards that I listed on my bankruptcy still offer me more cards but the interest rates are higher,’ explained a California woman.
Conclusion
In conclusion, one should feel relieved that after filing for bankruptcy in Hawaii the credit industry will not shun them for the rest of their lives. Maintaining a credit profile leads to rebuilding your credit, and affords peace of mind in the event of an unexpected emergency. However, hopefully, valuable lessons have been learned throughout the process and credit will not be overused in the future to supplement a lifestyle beyond one’s means.
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Blake Goodman received his law degree from George Washington University in Washington, D.C. in 1989 and has been exclusively practicing bankruptcy-related law in Texas, New Mexico, and Hawaii ever since. In the past, Attorney Goodman also worked as a Certified Public Accountant, receiving his license form the State of Maryland in 1988.
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