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 Dear
Bankruptcy Adviser,
After bankruptcy, will I be able to repair my credit and buy a car?
-- Mary
 Dear
Mary,
The answer to both of your questions is: Maybe. If you practice
good financial habits and are willing to take some difficult steps, then the answer
is "Yes." Yes, you will be able to repair your credit, and yes, you
will be able to buy a car.
Here is a strategy that I teach
my clients so that they can re-establish their
credit and start positive, successful lives after
bankruptcy.
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Rebuilding credit | |
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| 1. | Join
the Life After Bankruptcy Web site: Stephen Snyder started this company
after he filed bankruptcy. It is informative and a valuable resource as your begin
your financial life again. | | 2. | Get
credit: Make a list of, at most, 10 local banks and then call each one,
tell them that you have filed bankruptcy, received your discharge and would like
to apply for new credit. Ask if they could qualify you for an unsecured credit
card. If not, ask if they can give you a secured credit card in which you put
$500 into a savings account and have a credit card with a $500 limit. |
| 3. |
Verify
that the account will be reported to
the credit agencies: The way
to do this is to ask the company which
credit agencies will report the credit
line: Experian, Equifax and/or TransUnion.
Then check your three credit reports
two months later to verify. |
| 4. | Use
it: Every month, use the card (even if only for one purchase) and pay the
balance in full. If you need to carry a balance then try not to use the card again
until the balance is paid in full. | | 5. | Get
more credit: Repeat the steps above until you have three credit cards that
you can use and pay off each month. | |
Doing this will re-establish your
credit history quickly and raise your score. Once
a year, you can pull your own credit report to
check and see how you're doing.
Also,
at any point in the process, you can buy a car. You may have to do a little
detective work to find a lender, but it can be done.
Make a list of, at most, 10 car
sellers in your area. Call each one and tell them
that you have a discharge notice from your bankruptcy
and that you would like to know if they give car
loans after a bankruptcy. Make sure you get a
firm "yes" or "no" before
taking an application.
Make two copies of the discharge
letter that you receive from the bankruptcy court. The discharge letter is that
document that indicates you are free of debt. Keep a copy of this letter in your
car's glove compartment. This is necessary to show all future lenders that
your bankruptcy case was discharged, making you eligible for post-bankruptcy loans.
The other letter you should keep with your other bankruptcy files in a safe
place. You should also look at my
column regarding how to clean up your credit report after bankruptcy. Finally,
Mary, remember that if your financial distress (like that of most people) was
due to illness, divorce or loss of employment then you have nothing to be ashamed
about. The bankruptcy laws are here to protect you while you get back on
your feet. Follow the plan above and you will be able to repair your credit
and buy a car -- and faster than you might think.
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