By J Thomas Smith, Contributing Writer
Can I get credit after filing bankruptcy? As a bankruptcy attorney, I hear this question a lot. In fact, one of the first concerns people ask when they are considering bankruptcy, is whether they will be able to get credit after the bankruptcy is over. They fear that creditors will not have confidence that they will pay their debts in the future. However, bankruptcy is about giving you a fresh start. In a nutshell, the answer is simple, “Yes you can.” You can rebuild your credit right away in many cases.1
While bankruptcy gives you protection from creditors, your assets will be used to cover your debts after allowable bankruptcy exemptions. So, one might feel that they will not be given a chance to start over. But, in many cases, creditors may be willing to give you a fresh start immediately upon your receiving a discharge from the bankruptcy. Sometimes, you even retain your credit cards after you declare bankruptcy.
You Must Disclose All of Your Debts
Sometimes, debtors ask if they have to disclose debts if they want to retain certain accounts. Yes, you are required by law to disclose all of your outstanding debts. You must report any and all debts that you have. Failure to do so may make it difficult for you to get credit after bankruptcy discharge. Furthermore, it could cause you to land in jail. If you do not owe anything on a particular credit card, you are not required by law to report the bankruptcy to the creditor.2
Based on these facts, you could have a line of credit after your bankruptcy discharge. However, the creditor may discover your bankruptcy through other channels and subsequently cancel your line of credit. A number of companies will cancel your credit card as a means of minimizing bad debts, but this is not always the case.
Reaffirming Debt Is Not Recommended
While you are not required to do so, most creditors will allow you to reaffirm your debt and permit you to keep your card after discharge. I typically advise my clients against reaffirming debt since the whole objective of bankruptcy is to give you a fresh start. But, if you are willing to keep the old obligation and the Court approves it, the creditor will require you to enter into a new agreement.3
If the debt is discharged in bankruptcy, the creditor cannot collect the debt from you. However, if you reaffirm the debt, they will be able to collect the full amount of the debt you owe to them. After all, they are in the business of providing credit for a cost.
The Goal of Bankruptcy Is a Fresh Start
For the person considering bankruptcy, remember the goal is to get a fresh start, a chance for a new beginning. Creditors want to profit from your fresh start so they are very happy to offer you credit after bankruptcy, since you cannot get a another discharge for eight years if you had to file again.4
While you may be offered credit after bankruptcy, you may have a smaller line of credit and you may pay a higher interest rate. The company will do this to minimize their potential loss. However, if you are having financial problems, the last thing you should be thinking about now is credit after bankruptcy, although it is possible. For an evaluation of your financial status and whether you qualify for a fresh start through a Chapter 7 bankruptcy, consult an experienced bankruptcy attorney.
J Thomas Smith is host of “Sunday Morning Live” on “The Real Sound of Htown” KMJQ/Majic 102.1 (9-11 cst). He is an attorney, author, keynote speaker, and mental health consultant. Your comments are welcome at email@example.com or firstname.lastname@example.org. Follow on Twitter @drjtsmith102 on facebook.com/jthomas.smith.12 and instagram.com/drjtsmith102.