If I have a bankruptcy in my past, can I still use debt consolidation?
For many people, going through a bankruptcy it is one of the most stressful experiences of their lives. That’s why people who have gone through the process look for any other option than going through that again if they have financial troubles again. One of the first options they consider is debt consolidation.
Of course, this means that one of the first questions that they ask is whether or not they can qualify for a debt consolidation loan if they have a bankruptcy in their past. While it’s almost always possible to qualify someone with a past bankruptcy for a debt consolidation loan, there are a few things that people in this situation should be aware of.
Steps to getting a Debt Consolidation Loan after Bankruptcy
To start, it’s important to know the exact date of your bankruptcy filing and to be honest with your debt counselor about this date. A bankruptcy that is older than seven years won’t even be listed on your credit report, but more recent bankruptcies will show up to creditors. Depending on your situation, this may or may not effect the type of loan you qualify for.
The most troubling thing about a prior bankruptcy to a lender is that it tends to indicate a history of financial issues. By working with a debt counselor, however, it is possible that a client can work through these problems. In some cases, the debt counselor is able to identify an outside event that caused the bankruptcy and/or financial distress that led to the decision to apply for debt consolidation. For example, a client who declared bankruptcy due to medical debt but now want to go through debt consolidation to cut down on his or her monthly debt payments in order to rebuild savings would be considered to be an excellent candidate for a debt consolidation loan, even though his or her credit score might indicate otherwise.
Debt consolidation is one of the few financial products in which a lender really does look at the individual situation of each applicant. For that reason, people with bankruptcies in their past often find that this is a good way for them to reduce their monthly payments on their current debt. If you’re thinking of trying debt consolidation, talk to a debt counselor about your prospects for getting a loan.