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Chapter 7 discharge may be followed by new credit offers

After obtaining a bankruptcy discharge from a federal bankruptcy court in Pennsylvania or another jurisdiction, credit card offers may come unsolicited in the mail to the discharged debtors. As unlikely as that sounds, it happens because lenders are aware that a recently discharged Chapter 7 debtor has wiped out considerable debt and sometimes owes virtually nothing. The terms on are not as good as for those with excellent credit, but they are nonetheless real credit cards.

This is contrary to the popular idea that once a debtor goes through a bankruptcy, new credit will be almost impossible to obtain. We know that credit agency reporting of the bankruptcy can continue for up to 10 years. However, credit reporting agencies sometimes drop the bankruptcy reference sooner than the maximum time allowed.

That may depend on how many positive new credit events that the individual or joint debtors can build up on their report. For example, debtors in a Chapter 7 may reaffirm the loan payments on their automobiles. Continuing those payments will be reported on the post-bankruptcy credit record. Additionally, some people who file a Chapter 7 to wipe out unsecured credit card and medical debt will at the same reaffirm a mortgage that is paid up-to-date.

The debtors continue to pay on the house, or on one or more cars, without disturbance during the bankruptcy proceeding. The debt in a sense “passes through” the bankruptcy without complications. Those continuing payments help immensely, and may improve a score substantially over time.

In Pennsylvania and elsewhere there may be a variety of new credit opportunities that arise after the Chapter 7 discharge. Debtors will use their increased maturity and wisdom to decide whether to commit to new credit card debt. If so, the payment must be made in full each and every month in order to assure positive growth. If the consumers have some doubt about the ability to take on new credit cards, it may be best to relax a bit and focus on other more conservative ways of improving the credit rating for the time being.

Source: Fox Business, "Credit Card Life After Bankruptcy", Erica Sandberg, Aug. 21, 2014

Source: Fox Business, "Credit Card Life After Bankruptcy", Erica Sandberg, Aug. 21, 2014

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