rebuild credit after bankruptcy

When Can I Borrow Money Again After a Bankruptcy?

Your debt is discharged, and it feels like a thousand-pound weight is lifted off of your shoulders. Still, you know that building your credit depends on responsibly using credit. Many people assume that getting credit is impossible after bankruptcy, leaving them wondering how they are supposed to ever rebuild their credit score.

Fortunately, this is just a misconception. Learn more about when you can start taking out loans again, and if you’re still looking for options regarding bankruptcy, call Padgett & Robertson at 800-303-1416 to set up a consultation.

Your Debt Level Matters

First, know that the impact to your credit score depends a lot on what your credit score looked like prior to bankruptcy. For example, if you had tens of thousands of dollars maxed-out out on credit cards, which is a typical situation for bankruptcy filers, your credit score was likely already quite low due to your debt load. Your score would be even lower if you developed a history of late payments on these cards.

When you go through bankruptcy, your score might not be as seriously affected as you think. While creditors can still see the bankruptcy on your report, your score may still allow you to get new credit—especially if you have a stable income while no longer having to carry the large debt load you once had.

Personal Loans, Cars, and Credit Cards

People are surprised to find out that consumer debt can be fairly easy to get after bankruptcy. Don’t be surprised if you see a flood of credit card applications, offers from car dealerships, and loan offers in your mailbox.

After your Chapter 7 discharge, you cannot file again for eight years. That’s eight years that you are on the hook for every single debt you take on, and remember, banks make most of their money from letting people accrue debt. Additionally, since your credit is negatively affected by bankruptcy, banks know that they can charge a higher interest rate based on your credit score.


Mortgages are a little bit different. This is a massive 15- or 30-year commitment, and banks do not want to loan to someone at high risk of defaulting. If you file for Chapter 7 bankruptcy, you must wait at least two years to apply for an FHA mortgage. The wait may be just one year for applicants with extenuating circumstances.

There is a four-year waiting period for a conventional mortgage. However, you may be able to apply in as little as two years if there were extenuating circumstances leading to your bankruptcy. The waiting period for VA loans is two years, and the waiting period for USDA loans is three years.

Even if it has technically been long enough for you to apply for a mortgage, that doesn’t mean you’re a shoo-in. Lenders will want to limit their risks by increasing your interest rate or requiring a larger down payment. This means if you want to buy a house after bankruptcy, you may want to prioritize saving up for a down payment and building your credit score.

Be Prepared for a More Rigorous Application Process

While you can legally take on debt right away after bankruptcy, be prepared for it to take a little more time and cost you a little more in interest. This may be to your benefit, since you may need time to adjust your approach to money and debt while you adjust to your fresh start.

You may also want to be a little particular about what debt you decide to take on. Companies can be sneaky with high-interest rates, application fees, account maintenance fees, and even online payment fees. Although you want to rebuild your credit, don’t do so at the expense of your overall financial health.

Compare your offers, figure out which one will cost you the least over time, and choose accordingly. You may also want to work slowly on acquiring new credit, as the number of new accounts you have can have a significant impact on your score.

Discuss Your Bankruptcy Options with Padgett & Robertson

If you are still uncertain about whether or not bankruptcy is the right option for you, let’s sit down and talk. We’ll look over your finances and help you understand the options available to you. Just call us at 800-303-1416 or send us a message online to get started.

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