Life After Bankruptcy: Car Loans, Home Mortgages, and Credit
Although a bankruptcy filing appears on your credit report for 7-10 years, it does not mean that you are frozen in time for 7 or so years. Many bankruptcy filers are able to get car loans and buy homes relatively quickly after filing for bankruptcy relief. Oftentimes, bankruptcy filers who had been struggling financially recovered more quickly when they filed for bankruptcy than consumers who decided to deal with their debts on their own.
A bankruptcy debtor’s credit score may start to improve shortly after bankruptcy because when debts are discharged, you no longer owe them. There are also things you can do after you get your bankruptcy discharge to start repairing your credit. Actions taken to rebuild your credit generally take around six months before you start seeing an improvement in your credit score. You should take steps to rebuild your credit quickly after discharge if your goal is to obtain credit in the not-so-distant future. One example is obtaining a secured credit card or credit builder loan to establish a positive payment history, by making payments timely and keeping your credit utilization ratio low. Better credit not only helps you get approved for the loan you are seeking, but it also improves the interest rate you get. A high interest rate may cost you thousands of dollars more than what you would otherwise be able to get.
Some lenders may turn you down for a car loan or mortgage, but there are options! Many times, your own bank or credit union would be more willing to work with you because you have accounts in good standing with them. Another option is to scope out auto lenders that focus on extending credit to people with bad credit. These loans might come with higher interest rates, but you may be able to get a good deal, as long as it is in line with your budget. Making those car payments on time also helps improve your credit score – win-win. Once your financial picture is better, you can try to trade this vehicle in, swap, or sell and try to get a better deal. You can also check out lease-swapping options – where you take over someone else’s lease and take over the payments that are left. Whichever option you choose, just make sure you review all terms thoroughly to ensure it is a good deal for you.
There are other things you can try to do to get a better deal on your car purchase, such as: making a down payment, finding a co-signer with solid credit, avoiding “extras,” hidden fees and additional services that you may not need, opting for fixed versus variable interest rates, and not over-extending yourself.
If you are drowning in debt and are scared of filing for bankruptcy relief because you think you will not be able to buy a car or home for at least 7-10 years after filing, it is important for you to know that your credit will likely be much worse off if you do not file than if you do and your chances of getting a car loan and mortgage are higher after bankruptcy and potentially much sooner than you think. The road to debt-relief might not be as rough as you may think! You should discuss your goals and options with a bankruptcy attorney in your area. There is nothing to lose in getting informed, but potentially the stress of financial struggle.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 1,800 homes from foreclosure, eliminated $100,000,000 in mortgage principal and consumer debt, and have collected millions of dollars on behalf of our clients due to bank, loan servicer, and debt collector violations, negligence and fraud. Contact us for a free consultation to see how we may be able to help you.