It’s a common misconception that bankruptcy completely destroys creditworthiness. While it is true that filing is adverse credit information and will remain on your credit report for up to a decade and your credit score will take an initial hit, it’s entirely possible to qualify for financing after discharging debt, particularly if you are steadily employed. If you’re considering declaring bankruptcy, here’s what you should know about getting a credit card or car loan shortly thereafter. 

How Does Filing Bankruptcy Affect Credit?

If you discharge debt through bankruptcy, you can expect your credit score to drop substantially. Since lenders have minimum score requirements. This will probably inhibit you from getting a new credit card—but only initially. And, if credit card debt was a primary cause for your Bankruptcy, you should refrain from immediately trying to obtain credit cards anyway. The impact bankruptcy has on your credit score will diminish over time. With some restraint, planning, smart spending habits, and a little patience, you can rebuild your credit.

How Can You Get a Credit Card After Declaring Bankruptcy?

It takes the average consumer up to 2 years to qualify for credit cards after filing for bankruptcy. These cards will have higher interest rates and shorter credit lines. An alternative is to apply for a secured credit card in the meantime. These cards require a cash deposit as collateral, so they’re available to those who have bad or no credit due to their minimal risk to lenders. They operate like debit cards, but only you will know that. Further, since some of them can be converted to traditional accounts, they’re ideal for consumers trying to rebuild their credit.  Initially, you will only be able to spend up to the amount of the collateral posted.

If you use the secured card responsibly—and stay on top of your other financial obligations —it may then be possible to obtain a traditional card with a higher interest rate, even with the bankruptcy still on your record. Using the traditional credit card responsibly will help boost your score even more until eventually you’re eligible for all kinds of financing, including car and mortgage loans. Car loans will probably be obtainable soon after bankruptcy, provided you are employed and got a Bankruptcy Discharge, albeit at higher interest rates. This is another good way to rebuild credit.

When you need help filing for bankruptcy, turn to Thomas A. Corletta, Attorney & Counselor at Law. Practicing out of Rochester, NY, this seasoned lawyer has nearly four decades of experience serving clients in Monroe County. An expert in several areas of the law, he focuses primarily on criminal defense, bankruptcy, and family law. As the only attorney at the firm, he personally handles every case and will provide the attentive, one-on-one counsel that you deserve. To request a consultation, reach out online or call (585) 546-5072.