Bankruptcy and Credit

Bankruptcy and credit are closely linked, however not as close as many think.

First of all, if anyone is (or will be) in need of filing a bankruptcy, it is inevitable that he will undergo a loss of credit whether he files or not. So, bankruptcy does not cause a loss of credit; failure to pay debt causes a loss of credit.

Second, bankruptcy removes debt and the debt that it removes does not have to be paid. A successful bankruptcy will leave a debtor largely without debt. So, bankruptcy is the first step to financial and credit recovery. Without the removal of debt there can be no financial or credit recovery.

The recovery of credit after a bankruptcy depends on the creditors who advance the credit. Quite often the only difference after a bankruptcy is a higher interest rate. Conventional mortgage lenders require the debtor to wait a period of time before lending. The undersigned has seen refinancing within months of a bankruptcy and credit cards issues immediately afterwards. But credit extended after a bankruptcy depends entirely upon the lender and policies are changed as a matter of course.

Charles Chesnutt