Borrowers Discover that Loans Are Available After Bankruptcy

by | Jul 9, 2020 | Business, Finance


What is Bankruptcy?  

Bankruptcy is a legal judgment whereby individuals and businesses are deemed unable to make good on their payments. As a result, the courts will assess their assets & liabilities, and make a judgment about discharging those debts, thereby relinquishing the individual or business from making good on payments.


Many individuals and businesses face the prospect of bankruptcy, often through no fault of their own. It may occur that an unforeseen event such as COVID-19 shuts down economic activity on a global scale, igniting widespread business closures. Of the 488,506 Chapter 7 bankruptcy cases filed (October 2018 – September 2019), 460,661 cases were discharged (94.3%). Stats were less favorable for Chapter 13 bankruptcy cases (44.60%), indicating that the courts deemed the individuals capable of managing their debts. 


In the unfortunate situation that bankruptcy proceedings take place, many individuals and businesses wonder about the impact this has on their ability to obtain credit facilities. First things first, bankruptcy is especially damaging on your credit score. It can knock anywhere from 100 – 200 points off your score instantly, and those points stay off for a long time. In practical terms, your bankruptcy, judgment will cause your credit rating to crater – from Fair to Poor, or Excellent to Fair in double-quick time. 


What Happens to Your Credit Score in Bankruptcy Cases?


Bankruptcy proceedings should only be filed as a last resort when all other options have been thoroughly exhausted. For a comprehensive understanding of the implications of bankruptcy, read what the bad credit loan experts say at

Once a business has filed for bankruptcy, it is possible and even necessary to apply for a bankruptcy loan to salvage operations. As the experts point out, it is vital to accurately document all aspects of bankruptcy proceedings, including accurate reporting thereof. The precise line of credit that is used depends upon the range of options currently available. These can encompass secured credit cards, credit builder loans, and secured loans, et al. Further details are provided henceforward. 

The literature on the subject of bankruptcy suggests that credit cards will be negatively impacted. Possible outcomes include elevated APRs (higher interest rates on credit), increased collateral requirements, rejections of credit applications, and lender refusals to increase credit card limits. 

While these negative effects can certainly put a damper on things, users can take meaningful steps to repair poor credit. Much of what you decide to do depends upon the type of bankruptcy proceedings you have filed. 

Chapter 7 bankruptcy filings stay on your credit report for 10 years, while Chapter 13 bankruptcy filings stay on your credit report for 7 years. Recall that bankruptcy should only be used as a last option. It can be the most effective way to discharge your debt provided you answer all applications honestly. Forthrightness is essential with bankruptcy filings, particularly with lenders and potential employers

Borrowers Discover that Loans Are Available After Bankruptcy



How to Gradually Rebuild Credit Scores 

Credit facilities can be provided to people who have filed for bankruptcy in the form of secured credit cards (cash deposits equal to the value of credit extended). Provided the balance is paid off in full monthly, and balances are kept low, credit scores can gradually improve. While you get to keep all of your ‘exempted’ items in bankruptcy filings, many personal effects may be liquidated to pay off debts. If you’re looking to raise your FICO score, then one way to do that is by applying for a credit builder loan. These are readily available through local credit unions. If you have valuable exempted assets, you could try using them to apply for a lower APR. 

Initially, you may find that you only get approved for low-limit loans, but these amounts will gradually increase as you manage your credit history better and your credit score rises. Fortunately, a stable work history can offset the effects of bad credit to a degree. People with full-time employment are generally viewed more favorably by lenders. This multi-pronged approach to successfully applying for a loan post-bankruptcy will serve all of your financial interests well. 

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