Shrinking Consumer Credit Impacts Bankruptcy Filers
For years consumer bankruptcy attorneys have been fighting misconceptions about the impact of bankruptcy on credit. Consumers with abysmal credit scores and tens (or hundreds) of thousands of dollars in outstanding debt believed that they were somehow protecting their credit so long as they didn't file bankruptcy--and, conversely, that bankruptcy would "ruin" their credit.
Most of us watched the trends and developed some general responses based on what we'd seen happen with our clients: bankruptcy petitioners were likely to start getting new (albeit high-priced) credit offers soon after bankruptcy; starting out with a secured card and slowly building credit allowed many post-bankruptcy consumers to qualify for conventional credit in just a couple of years.
Recently, the rules of the game have changed. Anecdotal evidence indicates that it's harder for many consumers in bankruptcy or post-bankruptcy to get automobile loans and other credit that used to be more accessible. And, of course, this is consistent with the state of the national economy and the shrinking availability of consumer credit across the board. It's much more difficult to pin down a norm or general rule to share with clients.
That uncertainty may make it seem more difficult to respond to client concerns about credit, but in fact it's only the details that have changed. The bottom line remains the same: the client who is sitting in your office considering bankruptcy probably already has serious credit problems. Consumer credit isn't just shrinking for bankruptcy filers, but for all high-risk borrowers--and it's a near-certainty that your prospective client is already one of those.
