Q: Why is it so hard to get a loan while in bankruptcy? I am buying my home, and it needs major repairs. What do I do? I have a full-time job, and I am thinking about working on my MBA degree.
A: I’m getting a lot of questions about people in bankruptcy. And one thing that stands out to me is how many of these people want to rush right back into debt.
Think about your question to me: “Why is it so hard to get a loan while in bankruptcy?
Really; are you kidding?
People file for bankruptcy for all kinds of reasons. Many are forced into bankruptcy by no fault of their own—because of a job loss or massive medical expenses that were not covered by insurance. But the fact remains, if you file, it means you are in financial trouble. Lenders want to lend to people who have the means to pay back the debt. They know that before and soon after a bankruptcy, people need time to pick up their financial lives.
You need to spend time getting financially healthy again.
Unless the repairs you need are really essential (i.e. a leaky roof), you need to save up to pay for the home improvements. If you are working with a good contractor, perhaps he or she can do repairs and allow you to pay in installments. Or, perhaps you could learn to do some of the repairs yourself.
I also hope you don’t plan to borrow for that MBA degree. You need to save for that too.
If you filed for bankruptcy recently, you were required to go through counseling. Call that agency back and sit down with someone to help you develop some plans for the short-term (home repairs) and long-term (going back to school).
As I’ve advised others in bankruptcy, take your time to rebuild your financial life before getting into large financial obligations.