For most people, bankruptcy seems to be the end of the world. It is possible to rebuild one’s life even after bankruptcy and one can even borrow loans for specific purposes. However, not all lenders are willing to lend to people with a bad history of past bankruptcies. If they do, obviously the terms will be quite stringent.
The law lays down some rules for borrowing bankruptcy loans. Lenders impose some conditions, because as far as they are concerned, a loan to a bankrupt person is a high risk loan.
A person who has filed for Chapter 7 bankruptcy must wait for 2 years after filing, to apply for a loan. He can apply after his case has been dismissed.
A person who has filed for Chapter 13 bankruptcy can take a loan only after all his creditors have been paid in full.
A lender would not be willing to grant a loan request by a person who had been formally declared bankrupt unless he is sure that the borrower’s finances are good and that he can expect prompt payments from him.
For a bankrupt person, the first step towards getting a loan is to slowly and surely build up a good credit score. He should make his credit card payments prompt and pay all his bills on time.
The lender may not be satisfied with just viewing the credit report. So, the person applying for a bankruptcy loan should get reference letters from his credit card company and also various utilities like his electricity provider. The lender will be satisfied when he sees that regular payments are indeed being made.
There are some bankruptcy loans which are given even when the bankrupt person is still in debt. These loans however, are a huge risk for the lender.
Establishing a stable financial situation is difficult after bankruptcy. On the other hand, bankruptcy loans help the person bring back normalcy to his life.