Rising consumer debt and record high unemployment have left many consumers with the inability to keep up with their bills. Bankruptcy can provide a fresh start for many consumers. But debtors may face consequences after bankruptcy.
Renting an apartment may be harder during the first two to four years after bankruptcy. Many large apartment complexes with professional management do not rent to tenants with a recent bankruptcy. Tenants who are approved for rental in these complexes may have to pay high security deposits or several months of upfront rent.
Renting from an individual owner or smaller apartment building may be easier. Debtors, however, should be ready to explain their bankruptcy and offer an extra security deposit or rent up front.
Renting an apartment before the bankruptcy filing or staying in a current unit for a couple of years avoids the trouble of searching for a new apartment with a bankruptcy history. This also allows you to rebuild credit.
The chances of obtaining a traditional mortgage usually improve three to four years after bankruptcy. Debtors, however, may have to pay higher interest rates or make a larger down payment.
FHA and VA mortgages are generally available two years after the discharge of a Chapter 7 bankruptcy or one year after a Chapter 13 bankruptcy. Debtors must show that they have improved credit, paying bills, managing debt on-time, and have enough income for mortgage payments.
Credit cards are usually unavailable for a few years after bankruptcy but applying for a secured credit card can shorten this delay. A secured card requires a refundable safety deposit on the holder’s credit line. Credit card offers typically resume after 12 to 18 months of on-time secured credit card payments.
Loan financing for a new business may be difficult for a few years. Lenders are typically reluctant to make loans to anyone with a bankruptcy history. Some sub-prime lenders provide collateralized loans which are secured by using the borrower’s assets, such as a vehicle, and have higher interest rates.
Better options include saving start-up capital, pooling funds or asking friends or family for a loans. A business partner with good credit can also obtain a business loan.
Bankruptcy is not necessarily a disqualification for prospective employers. However, bankruptcy may make applicants ineligible for finance, accounting or other jobs involving money or financial information management.
Other professions may view bankruptcy negatively. Applicants need to stress that the bankruptcy is behind them and show the steps for rebuilding their credit and financial future.
An attorney can advise you on your debt options. They can also protect your rights in any bankruptcy.