Establishing Credit After Bankruptcy

I have represented thousands of consumers in personal bankruptcy and have come to the conclusion that one of the more consistent questions asked during consultations and during the bankruptcy proceeding is

"WILL I EVER HAVE CREDIT AGAIN" and "WHEN?"

While it's only natural to worry about whether or not you will be eligible to receive a loan or credit card, re-establishing your financial footing will require changing spending habits, expectations, and other behaviors as well.

Changing Behavior, Re-Establishing Credit

When asked these questions I must gently remind the client that in most instances, their credit is poor before they came to my office and that their credit will not renew itself without substantial change in the client's finances. The real problem to focus on is: WHAT ARE WE GOING TO DO ABOUT YOUR FINANCIAL CONDITION? If you were led into bankruptcy in part by mounting credit card bills, you have to determine how you became so indebted in the first place. Forcing yourself to stop eating out, refrain from buying appliances or cars that promise no payments for a year, and other financing plans is a first step in the right direction.

Credit card companies market themselves by promising an initial period of low interest or no payment in order to convince consumers to spend, spend, spend. "Bankruptcy Profits: The Credit Industry's Business Model for Postbankruptcy Lending.", written by Associate Professor Katherine M. Porter of the University of Iowa and investigator for the Consumer Bankruptcy Project, recently found that credit card issuers send more than DOUBLE as many credit card solicitations per month to individuals exiting Chapter 7 bankruptcy than the normal consumer. In fact, the study says, that of the 341 families in the study who filed Chapter 7 bankruptcy, 88% received credit card solicitations within the year and that the solicitations specifically mentioned their bankruptcies.

Isn't that fact amazing? The credit card industry is targeting post Chapter 7 bankruptcy individuals as a marketing tool!

So, the question you should be asking instead of when will I get credit after bankruptcy is: "WHAT KIND OF CREDIT WILL I BE OFFERED."

Why an Experienced Bankruptcy Attorney Can Help You

This is where advice from an experienced bankruptcy attorney, such as myself, comes in handy. The banks ("sharks" I like to call them) are hoping that you will get right back into the habit of relying on their credit cards with their outrageous fees and interest. They do not care that you may need to file bankruptcy again in the future because they have 8 years * to profit over any financial errors you may make. So, I am not saying that you should never have another credit card. I am saying that you should be careful, use it frugally and pay off the full balance each month to avoid unconscionable interest charges. Also, a DEBIT card may serve the same purposes for many individuals. However, if you do obtain a credit card, pay on time to begin building your credit to enhance your FRESH BEGINNING afforded through your bankruptcy filing.

*Under the "Reform" act passed in 2005, an individual can file a Chapter 7 bankruptcy and gain a discharge every 8 years as opposed to 6 years, and every 4 years in a Chapter 13. See my new section on the Bible and bankruptcy to see why Congress got it all wrong.