Filing for bankruptcy is an option for individuals who have no other recourse for relief from their debts. When your bankruptcy period is over, however, you might once again find yourself in a situation where you need to take out a personal loan.
Under Chapter 7 bankruptcy, a court-assigned trustee oversees the liquidation of certain assets before the discharge of your remaining non-exempt debts. Understanding your ability to get a loan afterward can affect how you live your life following bankruptcy.
Is it possible to take out a loan after bankruptcy?
While other forms of bankruptcy entail following a repayment plan that may bar you from taking out additional debts, the only thing stopping you from getting a personal loan after Chapter 7 bankruptcy is your credit score. Your credit is sure to drop after filing, and a Chapter 7 bankruptcy can remain on your credit report for as long as 10 years. Certain lenders will view you as a risky client, but there are some reputable loan companies that specialize in serving low-credit individuals.
How can a new loan help improve your financial health?
As you work to repair your finances after bankruptcy, taking out a personal loan might be a necessary step in reaching stability. Incurring a debt that you can safely repay each month is also a way to repair your credit to a healthy state. With responsible borrowing, you can reach a good credit score within two years or less.
Taking out a loan after a Chapter 7 bankruptcy is possible in some circumstances, and can be a strong move toward better credit if you approach it responsibly. However, you should remain aware that fraudulent lenders may target desperate individuals with low credit in an attempt to conduct a scam.