Does Filing for Bankruptcy Increase Future Offers of Credit?

Interviewer: Does filing bankruptcy make you more of an attractive credit risk? I know people that have filed, and then as soon as they do it, they get all these credit offers in the mail.

After Filing, Most People are Relatively Debt Free; since They Cannot File again for 8 Years, They Are Seen as Attractive Credit Risks

Vance: Yes, that commonly occurs. It's because you're debt free, depending on the bankruptcy. If we're looking at Chapter 7, you can only file Chapter 7 every eight years. Usually all of your unsecured debt is going to be included in the bankruptcy, such as your credit card debt and your medical bills. The credit institutions know that you can't go back into bankruptcy for a period of years, and you're debt free so you're a better credit risk than you were before. Hopefully, most of the people who file can and do learn their lesson.

They're more careful. They know that when they get these credit cards that that new pair of shoes is not necessarily an emergency or that pizza on Friday night's an emergency, and so they're a little more conservative with the way they use the credit cards.

It Is Possible for a Credit Union to Freeze an Account

Interviewer: That's understandable. Are bank accounts frozen during bankruptcy?

Vance: No. I've never had a client whose bank account was frozen. Now credit unions are a different animal.

Interviewer: Are they?

Vance: I've had a client come in and say that the credit union did freeze their account, but the regular banks, no. That was only one credit union. I've never had a problem with them since.

Interviewer: I wonder why. Why would the credit union be able to do that and not a bank?

Vance: They operate under different rules because they're all member owned. If you have a car loan, the credit union could possibly freeze your account to figure out what you're going to be doing with the car. I've only had that happen once, and since I've started, I've helped over 5,000 people file bankruptcy over the last 13 years, so I've had quite a bit of experience with it.