Beware Offers of Credit if You Recently Filed Bankruptcy

June 17, 2009

By Mike Wayman

Bankruptcy happens for a number of reasons. From financial hardship to medical problems, bankruptcy is a safety valve for the American Consumer. There are downsides to bankruptcy however. One of the biggest fears that people have when they file for bankruptcy is how long it will take to re-establish credit properly and whether or not they will be able to acquire new credit to buy things like automobiles or just to be able to qualify for a credit card.

One of the most interesting things about the credit industry, that surprises most people that file for bankruptcy, is that after your bankruptcy is discharged, offers of credit come pouring in to your mailbox and even your email. It seems to make absolutely no sense that if you recently discharged a bankruptcy that a credit issuer would want to take the risk of extending credit to you right? Well my friends, that’s not how the credit industry works.

Once you file bankruptcy you become a prime target for credit. You become a prime target especially after your bankruptcy is discharged. Here’s why: the credit issuers can charge you outrageous interest rates, some rates as high or higher than 20%.

It’s common for people that recently discharged a bankruptcy to receive solicitations in the mail from automobile dealerships that have financing arrangements with subprime automobile finance companies. Many of these companies will require large down payments with interest rates in the double digits. In thee cases, it almost makes more sense to save your money and buy a very inexpensive car if you can.

Other offers of credit can come from credit card issuers. These credit card issuers may only extend $500.00 of credit but charge up front “set up” fees and other annual fees that will make your available balance, just by accepting the card, less than $300.00.

Avoid falling for these kinds of traps as much as you possibly can. When you receive offers of credit after a bankruptcy, be sure to read the fine print on the contract if you are interested in reestablishing your credit.