3 Options for Borrowing Money After You've Filed for Bankruptcy
Posted on: 26 August 2015
If you haven't had a chance to get back on your feet since you filed for bankruptcy, there's already a financial emergency staring you in the face. It's not the ideal situation, but it happens to people all the time. Instead of panicking over how you'll find the money to cover the emergency, consider these three options for borrowing money after you've filed for bankruptcy.
Credit cards
Believe it or not, there are some credit card companies who actively target people who've just been through a bankruptcy. These credit cards typically come with a much higher interest rate and may even require a security deposit, but they'll happily loan you money because they know that you can't simply turn around and file for bankruptcy a second time; you have to wait eight years to file a second Chapter 7 bankruptcy, and you have to wait at least two years after filing a Chapter 13 bankruptcy.
You need to be very careful with using credit cards after a bankruptcy, especially if credit card debt was the reason you filed in the first place. Because the interest rates offered to most post-bankruptcy applicants are so high and the minimum payments seem small, it can be very easy to run up a new load of debt by relying on credit cards for your emergency situations.
Loans
While most banks may not be willing to loan you any money right after a bankruptcy, there are other lenders you can use when you need a quick loan. Payday lenders offer "cash now" loans to most people, regardless of their credit. These loans are typically processed on the same day and have short repayment plans, usually just a week or two. These loans usually require some sort of proof that you can repay them within this time frame, such a post-dated check or they'll set up an electronic transfer from your bank account to repay the loan.
Credit unions may also offer you a loan after a bankruptcy, but only if your credit is in fair shape. They also typically offer secured loans, meaning you have to offer some sort of collateral in order to receive the loan. These types of loans can be more difficult to obtain, but if you happen to come through a bankruptcy with your credit in fair shape, it may be an option.
Borrowing from your 401K
If you have a 401K plan through your employer, you may be offered the opportunity to borrow some of it in order to cover your emergency expenses. Most companies only allow you to have one 401K loan out at a time, so if you're already paying one back, this might not be an option for you. If you can take out a 401K loan, you need to know how much you'll be allowed to borrow and what the repayment terms are. These repayments are typically taken out of your paycheck each pay period, so you don't have to worry about missing one and falling behind.
While this loan may seem the most convenient option, there are drawbacks. If you leave your job or are fired, you may have to repay the full amount of the loan immediately. If you struggle making ends meet with your paycheck before the loan, you'll have more difficulties afterwards, because your paycheck will be smaller since the loan payments come out of it automatically.
Everyone's situation is different after a bankruptcy. Your credit may be completely demolished, or you could still have a fair credit rating and more borrowing options. Consider each of these options carefully so you can choose the most financially responsible borrowing method to cover your post-bankruptcy emergency. For more information about your options, visit resources like http://www.usacashservices.com.
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