How Will Bankruptcy Look to Lending Institutions?

Bankruptcy can put an unfavorable mark on a person's credit report which can last up to ten years. However, the overall effect of a bankruptcy filing can be less harmful than a poor bill paying record as reported to potential lenders.

From the perspective of lending agencies, a recently discharged debtor is a better credit risk then one drowning in debt. For a person who is in need of filing a bankruptcy, their credit report often has collections, judgments, or a credit history of slow or non payments. When compared to a recently discharged debtor who is not responsible for any debt and few loans, many lending agencies are willing to extend credit to someone with a bankruptcy filing on their credit report. Many people who do end up filling bankruptcy are offered new credit cards or car loans within weeks of a bankruptcy discharge.

I have seen in my own practice of law clients whose credit score has gone up into the mid six hundreds within months of filing the bankruptcy. I have had clients be able to buy new cars and obtain a new credit cards too. Required credit counseling courses taken during the course of the bankruptcy process can help educate people so they can make responsible credit decisions. Diving back to credit cards or loans after a bankruptcy should be done with great care.

Each prospective lending institution has different regulations and it is hard to say what weight each institution will give to a bankruptcy on a credit report. With more and more people filing bankruptcy and the more common bankruptcies are, the stigma of a bankruptcy is surly less than it was before. The bankruptcy will be reported on your credit report for up to ten years but often it will be better than a credit report bogged down in unpaid debt. Bankruptcy is a tool used to give people a fresh start or a financial redo.