Even if they are being called daily by creditors and facing collection lawsuits, many New Yorkers shy away from declaring bankruptcy because they believe doing so will prevent them from ever getting credit again. This is untrue: once the crippling debt load is discharged, you can build your way to a stellar credit score. You may just have some challenges when you approach lenders in the months after bankruptcy. The tips below can improve your chances of getting the credit you need to start rebuilding.
Approach smaller lenders
Large banks tend to evaluate your creditworthiness by using a standard formula that can penalize borrowers with a bankruptcy on their record. Try approaching a credit union or community bank where you can meet with a loan officer and explain your situation. If you want a term loan to start a business, then small business lenders may be willing to help if you have been financially responsible since your discharge and the bankruptcy occurred at least two years ago.
Request lower limits
Instead of requesting a $10,000 line of credit, start with $1,000. This lower amount can still help you build a positive credit history, and if you pay your account on time each month, then the lender may gradually increase your credit limit. Be patient and consistent, and your efforts will soon pay off.
Append your credit report
Under the Fair Credit Reporting Act (FCRA), you are allowed to add 100-word explanations for your bankruptcy to your credit report. Perhaps you became ill at a time when you were between jobs and lacked medical insurance, or your spouse surprised you with a demand for divorce. Some lenders will be more forgiving if your bankruptcy was due to illness instead of uncontrolled spending.
Offer to get a cosigner
A lender may be willing to work with you if a friend or family member with excellent credit is willing to cosign for you. While this step reduces the risk for the lender, if you default your cosigner will be responsible for paying the debt, so be sure you can make payments.
When it comes to being approved by lenders after a bankruptcy, accept the reality that there are no shortcuts or quick fixes. Lenders need to be satisfied that you are both willing and able to repay your financial obligations and in the beginning, a recent bankruptcy won’t give them that reassurance. Approaching lenders that are more flexible, requesting lower limits and honoring your new commitments will eventually make your bankruptcy matter less and less.
If excessive debt is destroying your credit and preventing you from moving forward, then a New York bankruptcy attorney can review your case and determine if you are a good candidate for Chapter 7 bankruptcy. It discharges your unsecured debt and is over quickly so that you can start rebuilding much sooner. Jayson Lutzky is an attorney practicing in New York State for over 35 years. If you are considering filing for bankruptcy, then contact Mr. Lutzky’s office at 718-329-9500. Mr. Lutzky offers free in-office initial consultations. Visit www.MyNewYorkCityLawyer.com/Bankruptcy to learn more.