Navigating credit card applications under Chapter 13

Getting turned down for a credit card is never easy. Getting turned down after filing for Chapter 13, though, is not particularly surprising. While Chapter 13 bankruptcy, and other forms of bankruptcy, no longer carry the stigma they once did, there are many nuances of these processes that must be navigated carefully and with a calm, educated approach.

In Mississippi, those filing for Chapter 13 are usually doing so as a means of debt relief. Under Chapter 13, debtors are frequently allowed to keep some property while simultaneously paying-down debts under a repayment period of three to five years. Following that repayment period, many of the debts can be discharged.

Chapter 13 bankruptcy is usually appropriate for those who have steady income but overwhelming debt. While the repayment plan is crafted to be manageable for the debtor, it's difficult to incur additional expenses during this time. This is often why people will be turned down for credit cards, even secured cards, in the midst of Chapter 13. Credit card companies typically review the income listed on one's application, and consider that in light of repayment obligations that can be viewed via an applicant's credit report. If the two don't seem to realistically match up, a rejection is likely to occur.

This doesn't mean, though, that debtors can't get back on their feet. One's best ally at this point is time itself. As months and then years go by, one's credit rating tends to go up, even if they have declared bankruptcy. Those months and years can also be used to find creative ways to boost one's income, so that new applications can feature a higher amount of reliable funds coming in each month.

Since bankruptcy issues can be so complicated it may be best to speak with a professional who knows the ins and outs of the process. By working together, an individual who is overwhelmed with debt may obtain the fresh financial start he or she needs.

Source: Fox Business News, "During Chapter 13 bankruptcy, secured cards tough to get," Erica Sandberg, May 6, 2014

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