How Will Lending Institutions Evaluate Bankruptcy?

How Will Lending Institutions Evaluate Bankruptcy? "A bankruptcy can leave a negative note on a person's credit report for up to ten years. However, the overall impact of a bankruptcy filing may be less damaging than a poor record of bill payment as reported to prospective lenders.From the perspective of lending agencies, a debtor who has recently been discharged poses a lower credit risk than one who is awash in debt. A person who needs to file for bankruptcy typically has collections, judgments, or a history of late or missed payments on their credit report. Compared to a recently discharged debtor with no debts and few loans, many lending agencies are willing to extend credit to those with a bankruptcy filing on their credit report. Many individuals who file for bankruptcy are offered new credit cards or auto loans within weeks of their discharge.In my own legal practice, I have encountered clients whose credit score increased to the mid-six hundreds within months of filing for bankruptcy. Clients have been able to purchase new automobiles and obtain new credit cards. Taking required credit counseling courses during the bankruptcy process can assist individuals in making responsible credit decisions. Reapplying for credit cards or loans after a bankruptcy should be undertaken with extreme caution.It is difficult to predict the weight that each prospective lending institution will give to a bankruptcy on a credit report because each institution has its own regulations. As more and more individuals declare bankruptcy and as bankruptcies become more prevalent, the stigma associated with bankruptcy has diminished significantly. The bankruptcy will remain on your credit report for up to ten years, but in most cases it will be preferable to a credit report bloated with unpaid debt. The purpose of bankruptcy is to give individuals a new financial start or a second chance.
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