Bankruptcy filers are often told a host of myths and misconceptions about how horrible their lives will be in the wake of a bankruptcy proceeding. While life after bankruptcy certainly won’t be easy, unfortunately, much of the popular beliefs about bankruptcy are far from accurate, according to credit experts as well as people who’ve successfully and quickly bounced back from a bankruptcy filing.
Myth 1) I can’t get any credit cards for seven years!
Reality: There are many credit cards that you can apply for and
be approved post-bankruptcy. Obviously, these cards will have higher rates, but over time if you maketimely payments you can graduate to more prestigious cards with better terms and interest rates. In fact, getting a credit card can be one of the best things you can do post-bankruptcy as it will give you a chance to start re-building your credit.
Myth 2) I can’t buy a house for at least 10 years.
Reality: Bankruptcy will NOT automatically disqualify you from getting a mortgage. You can actually be in the middle of a Chapter 13 bankruptcy proceeding and still get an FHA home loan. There are many lenders who will work with you post-bankruptcy. You may find working with a mortgage broker can also be a resource in aiding you to find lenders who may be able to assist you with financing.
Myth 3) I can not get financed for an auto loan. The only cars I can get will be used cars or from “bad credit car lots”.
Reality: Obtaining a car loan post-bankruptcy isn’t as difficult as you think. Many lenders will work with you on financing a new vehicle. The key to getting approved for an auto loan is a process called pre-qualification. This involves you researching lenders for those who will work with someone with a bankruptcy. When you find a lender that says they are willing to work with you knowing about your bankruptcy, you are pre-qualified. This means you can go select a car that you can reasonably afford and they will finance you.
Myth 4) Bankruptcy is the WORST thing you can do to your credit. Bad credit or no credit is better than a bankruptcy.
Reality: This is a very common misconception. Obviously, bankruptcy does not help your credit rating. However, by filing bankruptcy you have given yourself a second chance to start fresh. Once you realize that you are not going to be able to pay your bills in a reasonable fashion and your financial position is rapidly deteriorating, filing bankruptcy may be the best choice you could have made. Allowing serious delinquencies to remain on your credit report will ensure that your credit rating will NEVER improve. While bankruptcy may damage your credit rating, remember it is ONLY temporary. You must take proactive steps to ensure a smooth recovery. By following these steps, you can dramatically improve your credit score in only a few months
Myth 5) My current or future employers will find out about my bankruptcy!
Reality: Current and prospective employers are prohibited by law from running a credit check without your permission. Even if granting an employer permission to view your credit records is a prerequisite to employment, it still won’t necessarily bar you from employment. If an employer requiring you to sign a waiver so they may obtain a credit check this will give you an opportunity to offer an explanation for your bankruptcy. Furthermore,bankruptcy protection can help to prevent embarrassing issues such as wage garnishments or credit collectors calling your workplace.
Myth 6) My friends, family and colleagues will find out about my bankruptcy!
Reality: While it is true that bankruptcies are considered public records, unless someone is specifically looking for your name it is unlikely that anyone will find out. Millions of people every year file bankruptcy and your records are just one of many.
As you can see, much of what people believe about bankruptcy simply isn’t true. While bankruptcy does have a negative impact on your credit, it is also a new beginning. Bankruptcy is the start of your journey down the road to financial recovery!