Acquire a Private Loan After Discharged Bankruptcy

A discharge bankruptcy makes a private loan harder, but not impossible, to get. It requires work on your part and the following information can help prepare you to make the best case to a lender.

Understand Your Discharge

A discharge bankruptcy prevents creditors from taking action, such as garnishing wages, for payment of debts incurred before the bankruptcy was filed. If the debt was secured with a lien, such as with a home equity loan, creditors can still seek to foreclose on the property. You will need to know and be able to prove whether the bankruptcy was beyond your control and whether any of the discharged debt has been repaid despite the bankruptcy filing.

Borrowing After a Discharge Bankruptcy

For federal student loan programs, a discharge bankruptcy will not affect your ability to apply for and receive funds. However, private loan programs can and do take financial history into account. Typically, you cannot apply for private loan programs for seven to 10 years after a discharge bankruptcy. But you still have options.

Was It Beyond Your Control?

Private loan programs can take certain mitigating factors into account when considering whether to loan money to you after a discharge bankruptcy. If the bankruptcy filing was beyond your control, you can avoid the seven to 10 year exclusion period. Examples of a bankruptcy filing being beyond your control include bankruptcy filed because illness or disaster left you unable to repay debt. You must be able to prove this was the reason for the filing.

Has There Been Repayment?

While a discharge bankruptcy wipes out most debt, you can still arrange for repayment if you are able. If you have done this, private loan programs can take that into account when considering whether to allow you to apply for a loan. The same is true for developing and maintaining a good credit score and a sound credit track record. Even if you must wait through the exclusion period, the stronger your credit history when applying for a private loan, the better your chance of approval.

Getting a Guarantor

In many instances, a borrower has no mitigating factors for a lender to consider in applying for a private loan after a discharge bankruptcy. It was not beyond your control. There has been no repayment or credit repair. You are in the exclusion period. You can still obtain a private loan if you have a guarantor who will co-sign the loan agreement with you and their credit standing is good. This can be a friend or family member.

Developing Relationships

A variety of factors can lead to filing for discharge bankruptcy. Filing does not have to ruin relationships with lenders. In almost every type of private loan, a relationship with the lender will pay off. You must, of course, demonstrate sound financial habits, a willingness to redress past problems and an ability to repay a loan going forward.

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