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Home >> Bankruptcy
What Does Filing Bankruptcy do to My Credit?
If I file bankruptcy now, what will that do to my ability to
borrow money in the future?
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 During the bankruptcy, any request for credit should first go through your attorney and the trustee. It is possible to borrow while you are in a bankruptcy. The VA as one example allows this for home loans. Also, if a mechanic needed a particular tool and could have it financed, that benefits their trade, their income, and therefore all the other creditors, but you'd have that extra step first of ensuring the court approved.
The second part of the equation is getting the financing. Many lenders have a policy and do not loan to someone who is in, or ever has been in a bankruptcy. Some look at when the bankruptcy was filed and look for a lower-risk loan. That means they want collateral and a down payment, so that they have equity from the beginning.
Loans can be done for someone who is in or has been in a bankruptcy, but they are harder to receive and the terms may not be as friendly. That means the rates and cost of credit may be higher, the term may be shorter and that means a higher monthly payment for you. When indebtedness has been a problem once, it may be again, and that frightens many lenders.
Published on BankingQuestions.com 2/19/09
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