By Justin Harelik, Esq.
If you practice good financial habits and are willing to take some difficult steps, 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.
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.
Finally, 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.
Justin Harelik is a practicing attorney in Los Angeles.