Filing for bankruptcy can be a deeply frustrating and scary process, one defined by anxiety about the future and financial stress. Unfortunately, just because you’re filing for bankruptcy doesn’t mean the rest of your life – and the financial demands that come with it – come to a stop. So, what can you do if you need money while in bankruptcy? Though you don’t have many options, there are a few ways you can access the funds you need.
Know Your Filing Status
Bankruptcy isn’t a one-time event. It’s a process that goes on for a period of time, so if you find that you need to borrow money, it’s important to know where in the overall process you are. Having an open bankruptcy filing is different from trying to borrow money with bad credit and you’ll need to take different steps depending on your filing status and what type of bankruptcy you filed for – either Chapter 7 or Chapter 13.
Consult The Courts
Also known as consumer bankruptcy, Chapter 13 bankruptcy stays on your credit report for seven years, but it is generally advantageous because it allows you to reorganize your debt and pay back a significant part of it. In a way, it’s actually a way of avoiding the “blank slate” approach of Chapter 7 bankruptcy but, it does make it hard to borrow additional funds.
If you need to borrow money while you have an open Chapter 13 bankruptcy filing, you’ll need to seek court authorization. In general, those in the reorganization process are explicitly barred from taking out any credit or costs that cannot be paid in full. That being said, it’s not always avoidable, and the courts will evaluate the specific circumstances and decide whether it is appropriate or not.
Know What You Need
One of the most important issues to consider when seeking a loan while in bankruptcy is what you need that money for. You don’t want to apply for a loan for anything other than the absolute necessities. That means that you might, for example, apply for an auto loan while in bankruptcy so that you can continue commuting to work. Still, you don’t want to do this unless it will cost you more to repair your current vehicle than to buy and maintain a used one, and you shouldn’t spend any more than necessary.
Make Your Case
If you are approved for a loan while you have an open bankruptcy filing, you may be asked to give all the details of your bankruptcy case to your lender as part of your application; you may also need to offer collateral, such as jewelry or other personal property. Another option you may have if you need a loan while you have an open bankruptcy filing is to seek a cosigner, such as a relative, who has better credit, and who can take responsibility for your loan in the event that you fail to repay it.
Just as is the case for those with poor credit, it is possible to get a loan during bankruptcy, but it isn’t easy, especially if you want an unsecured loan, which is why you shouldn’t pursue one if it’s not absolutely necessary. Though you may spend years dealing with your debt and living from paycheck to paycheck, this is still a second chance. It’s important to treat it as such and develop responsible financial habits that will serve you well for years to come.