Through many years of experience‚ our Los Angeles Chapter 7 bankruptcy lawyers have found that one of the primary reasons people wait so long to file for this type of protection is their concern regarding their credit.
Our response is usually two-fold:
- If you are mulling a bankruptcy‚ your credit is probably suffering – or going to suffer – as it is.
- While your credit will inevitably take a hit‚ it’s not as difficult to bounce back as you might think.
People have a lot of misconceptions about how a bankruptcy is going to impact their financial future. For example‚ they mistakenly believe that it will be many years before they can buy a vehicle or a home or even get an unsecured credit card.
All of this is simply untrue.
Let’s take a closer look at that last one – getting an unsecured credit card.
Why would you want one anyway?
It ultimately comes down to rebuilding your credit. A secured credit card could be a safer option‚ particularly if out-of-control spending was the problem to begin with. But you may see a faster‚ more noticeable credit score boost with an unsecured card.
The main difference is in the payment structure. A secured credit card will require that you keep the equivalent of the card’s limit on deposit with the issuer of the card. Typically‚ you would start with a small amount‚ say $250. You keep that on file with the issuer and then borrow against it. An unsecured card‚ meanwhile‚ is one that you will not have to make a deposit on prior to use.
Contrary to popular believe‚ unsecured cards are not off-limits to those fresh off a bankruptcy. In fact‚ you may notice soon after your bankruptcy is discharged that you start getting offers from credit card companies.
One of the main reasons that newly-discharged bankruptcy candidates are desirable to financial institutions is the knowledge that you can only file a Chapter 7 once every eight years. So more than likely‚ whatever debt you do rack up after that point‚ you’re almost assuredly going to have to pay.
Secondly‚ the banks know you aren’t likely to ever need to file again. The vast majority of people who file bankruptcy only do it once in their lives.
So now that you have no debt and whatever debt you do incur you’ll have to pay – and are likely to pay – banks want to make you an offer.
Bear in mind that many of these offers aren’t going to be great. You’ll be looking at high annual fees and interest rates. However‚ you have to start somewhere. Re-establishing that trust with mainstream lenders will make you a good candidate for better deals down the road. So long as you remain in good standing‚ you may even be able to explore new card options within a year or so.
It may seem tempting to swear off credit cards altogether after a bankruptcy‚ but that’s not usually advisable. The sooner you start aggressively working to rebuild your credit‚ the faster you can move on to the next chapter.
If you are contemplating bankruptcy in Los Angeles‚ contact Cal West Law to schedule your free consultation. Call (818) 446-1334.
Getting unsecured credit cards after bankruptcy‚ March 29‚ 2013‚ By Justin Harelik‚ Bankrate.com