Over the years, we have had many Minnesotans contemplate bankruptcy but what they really want to know is, if I do this, how will bankruptcy really impact my credit? If we let our home go back can we get financing to buy another one soon so we are not on the street? Can we buy a car if I need another one- I have to get to work? I completely understand these concerns our guests have and if I were in your shoes I would share the same concerns. We all have them- we need to live, a place to stay and we need vehicles to get around!
Kain & Scott has been Minnesota’s bankruptcy law firm since 1972. We have seen many changes in the credit system in Minnesota over the past 44 years. Things have changed- a lot!
So lets dig in and discuss how bankruptcy will impact your credit after filing bankruptcy in Minnesota
QUESTION 1: HOW IS YOUR CREDIT NOW?
I always start with this question. Most Minnesota guests we see have fairly poor credit now. The truth is, and most people would admit, their credit is not so good right now. If you were frank with yourself, the chances of getting a home loan or car loan now may be difficult.
Even if you could get credit now, the chances are the terms of the credit would be painful and the interest rate would be high. I want to be clear with my readers, this is not exactly answering the question raised above- how bankruptcy impacts your credit in Minnesota. However, the starting point in any analysis is how is your credit now?
You say, ok, my credit is poor, but still- I have not filed a bankruptcy. You say, Wes, isn’t bankruptcy seen as the ultimate failure which is devastating on your credit? I say no!
QUESTION 2: IF I FILE BANKRUPTCY HOW DOES IT APPEAR ON MY CREDIT?
A bankruptcy filing does appear on your credit report for 10 years. That is a certainty. Some times our guests mistakenly think it is only on the credit report for 7 years. I think the mistake comes from the fact that we are often referring to a chapter 7.
QUESTION 3: IF I FILE BANKRUPTCY- WHAT HAPPENS TO MY CREDIT ?
I know this sounds really strange- but for most of our guests, their post discharge credit score goes up! Wes, are you drunk? No- I am not drunk and yes, most of the time your credit score goes up. That’s because most people come out of bankruptcy with no liability on any debt!
For many of our guests, it is the first time since they were teenagers that they are debt free! So when your debt is eliminated, the credit reporting agency says, oh wow, look at that- and increases your credit score. I think it is fun to receive phone calls from clients after their bankruptcy discharge who are really excited to learn their credit score has gone up! Who knew filing bankruptcy would improve your credit score! But, it most cases it is true.
QUESTION 4: WILL BANKS LEND ME MONEY AFTER BANKRUPTCY?
Yes- they will lend you money. Why? Here is a little know secret so many do not know about banking and financing. You see, banks don’t give two rat’s butts if you pay other creditors. What that bank really wants to know is are you going to pay me!?
This is why a bank will not lend you money if you don’t file bankruptcy (but are knee deep in debt) but would lend you money if you file bankruptcy and have no debt! Why would they not lend you money if you have no debt?
Often, if you have a down payment and a decent job, the terms of your credit after a bankruptcy discharge are not bad at all. We can even refer you to professionals who help you get your life back. In most instances, our guests, who could not get financing before the bankruptcy is filed, can get financing after the debts have been discharged. I know what you are thinking but it’s true!
At Kain & Scott, we know how you feel. Many of our guests, if not all of them, have felt the same way. What they found though was not the same thing they feared before hand. What they found is that they could get credit after the bankruptcy was over and in fact, it was easier to get credit after the bankruptcy was discharged than beforehand.
QUESTION 5: DOES KAIN & SCOTT HAVE PROFESSIONALS WHO CAN HELP THEM WITH CREDIT AFTER BANKRUPTCY?
Yes, at Kain & Scott we have a list of Minnesota professionals who also help you get your lives back in all different areas including finance. We have loan officers who specifically deal with people who have just come out of bankruptcy and need to purchase a home or a car.
We have a list of attorneys, loan officers, vehicle dealers etc all who have a motto similar to ours- “We don’t judge you, we HELP you get your life back!” These professionals work with us and understand the bankruptcy issues. They often are able to get our guests very favorable terms on financing for vehicles and homes.
For those of you who now own a home and you are under water- but you worry you will never get a home loan again, there is hope. Often, getting rid of your debt, and saving a down payment, and connecting with a loan officer who understands what you are going through is all that is needed to get your life back on track.
CONCLUSIONThe truth is, bankruptcy clears the decks, eliminates your liability on debts, and give your family a fresh start, a new beginning. Life after bankruptcy is wonderful- you have no debt and credit is available to you for the asking. Most of our guests purchase homes and vehicles and obtain financing on them that is reasonable for their family.
Often, the terms of the financing are not bad at all. I think our guests can improve the terms of their financing by eliminating debt through bankruptcy and doing things like saving a deposit for purchases to improve financing terms.
At Kain & Scott, we have a list of professionals waiting to help you get your life back after bankruptcy is over with. Just ask us!