There are many ramifications of bankruptcy that consumers may not be aware of until after they file, but most Americans initially understand that securing credit will be more difficult.
Unlike other types of debt and delinquencies which stay on a consumer's credit report for seven years, a bankruptcy declaration will remain on their file for up to ten years. This may interfere with their ability to secure a line of credit for a mortgage, car or even a retail credit card. Because the implications are so heavy, some consumers may not know how to gain lenders' trust in order to obtain these loans, as evidenced by one man who wrote into the Bankrate advice website asking for guidance on how to secure credit.
There is nothing a consumer can do to have the bankruptcy removed from their report, but they can speak honestly about their financial situation to lenders in hopes that they may cut them a break - especially if the bankruptcy centered around special circumstances. According to research cited by Bankrate, more than 80 percent of bankruptcies are the result of an illness, divorce or period of unemployment. If this is the case, lenders may be more willing to extend credit if they are aware that the filing was not the result of irresponsible spending.
Many Americans may not be aware that they can also submit a personal statement on their credit report of 100 words of less that explains the negative information listed on their file. In addition to speaking face-to-face with lenders, individuals may also want to include this statement and provide a description of the circumstances that forced them into debt. However, this may only be beneficial if the debt was the result of an illness or unemployment.
Following a bankruptcy declaration, individuals may also find it more difficult to secure employment, as more employers are utilizing credit reports to determine job candidacy. A recent CNN report reveals that 25 percent of employers will rule out a job candidate with a bankruptcy filing on their credit report. Because of this, it's also important to be up-front with hiring managers about a negative financial situation.
In the meantime, consumers can improve their credit by paying all bills on time and using less than 50 percent of any available credit line they carry. Lenders may be more likely to extend credit if they see that the borrower is responsible with their bills.