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Your Guide On How To Get A Personal Loan After Bankruptcy

Learning how to get a personal loan after bankruptcy is vital to be able to bounce back from having none.

how to get a personal loan after bankruptcy guide

Yes, after a bankruptcy, it is still possible to borrow money from financial institutions. Although, of course, you have to be realistic with your expectations.

Bankruptcy is defined as “a court proceeding in which a judge and court trustee examine the assets and liabilities of individuals and businesses who can’t pay their bills and decide whether to discharge those debts so they are no longer legally required to pay them” by, America’s Debt Help Organization.

Furthermore, it says that bankruptcy laws “were written to give people whose finances collapsed, a chance to start over.”

We’ll focus on that last statement – a chance to start over.


If you are facing bankruptcy, hang in there as it doesn’t necessarily mean the end of the world. There are ways to bounce back and start over. As we have said earlier, there are financial institutions out there who are willing to help you get back on your feet through loan products such as a personal loan.

Let’s face it, in a lot of cases especially in the past, people file bankruptcy because of financial difficulties — and that’s totally fine. It’s not giving up, rather, it is accepting that there are things beyond your control.

However, the good thing is, bankruptcy is not the endpoint.

Perhaps by now you already know how flexible a personal loan is. You can use it for almost anything and everything under the sun. Yes, the money you get from a personal loan can also help you when you are financially challenged. The only downside is that it may be hard to qualify for a new loan at a low-interest rate, which I think is already understandable.

Now, before you head on to the nearest bank or credit union, hang on. As a borrower who filed bankruptcy, it is important that you are fully knowledgeable before you even sign a personal loan with any financial institution.

So, how to get a personal loan after bankruptcy then?

Well, for you to fully understand the process, we are going to share with you the basics of getting a personal loan after bankruptcy.

In particular, we are going to answer some of the most commonly asked questions regarding this topic, which include the following:

  • What is bankruptcy?
  • What are the different chapters of bankruptcy in the U.S.?
  • How soon after bankruptcy can you get a personal loan?
  • What do you need to do when applying for a personal loan after bankruptcy?
  • What to do if you get approved of a personal loan?
  • What to do if you get disapproved of a personal loan?
  • What to watch out for when getting personal loans?


Before we get into the process of how to get a personal loan after bankruptcy, we thought it is just right to properly define what bankruptcy is in the first place.

Earlier, we share a definition from This time around, we got a definition of the word from The Economic Times.

It says that bankruptcy is filed by an organization when it is “unable to honor its financial obligations or make payment to its creditors“.

The “petition is filed in the court for the same where all the outstanding debts of the company are measured and paid out if not in full from the company’s assets.”

Technically, filing a bankruptcy is a legal course undertaken by the company to be able to free itself from any debt obligation. Any debt that is not paid to creditors in full is forgiven.

Bankruptcy is universal, however, bankruptcy filing differs from one country to another.

In the United States per se, there are two main chapters that are followed particularly on bankruptcy. These are Chapters 7 and 13, which we are going to tackle one by one in the next line.


One important thing that you need to take note of is that the type or kind of bankruptcy you end up with will affect how soon you will be able to get a personal loan.

Although, in most cases, those who filed for bankruptcy can apply for a personal loan shortly after the bankruptcy proceedings are done.

As mentioned earlier, in the United States, there are two main types of bankruptcy that significantly impacts your ability to loan money from a lending company.

Let’s discuss each of them for your reference —


Chapter 7 is also known as a liquidation, or in some cases, they call it a “fresh start.” You are probably wondering why to use such terms for this. Well, with Chapter 7, your unsecured debts are wiped out.

However, it is important also to note that the court will likely liquidate some of your assets to be able to meet a part of your obligations. Some of the assets that may be exempted from bankruptcy sale are basic household furnishings, vehicles, as well as tools you need for work.

Although it sounds great, the downside of this is, Chapter 7 bankruptcy remains on your credit report for a maximum of 10 years.


Chapter 13 bankruptcy is also popularly known as an adjustment plan or wage-earner plan, which basically means, it will not wipe out your debt.

What happens instead is that you can repay a smaller amount of the debt with a payment plan that usually lasts for three to five years.

The good thing about Chapter 13 bankruptcy is that it allows you to keep some of your property such as your house. Also, the bankruptcy drops off your credit report in about seven years. A little sooner as compared to Chapter 7.

Obviously, whether your file Chapter 7 or Chapter 13 bankruptcy, one this is for sure — it does have a significant impact on your credit score. Unfortunately, the higher your score before the bankruptcy is, the bigger the drop would be.

However, the more time that elapses since your bankruptcy, the more your credit score improves, which means the more likely you are to get an approval of your personal loan application.

If you want your credit score to improve, you can always work on that by following good habits right after bankruptcy.


Before we move on about how to get a personal loan after bankruptcy, for sure, you too are wondering when is the best time to apply for a personal loan after such an event.

Here’s the thing. You do not have to wait long after bankruptcy to apply for a personal loan.

In fact, you do not have to wait until the bankruptcy is over!

Yes, you read that right.

Particularly for those who filed Chapter 13, for as long as you make your Chapter 13 payments on time for the period required, you can definitely apply for a personal loan.

Meanwhile for those with a Chapter 7 bankruptcy, as we mentioned earlier, you are required to sell off specific assets to be able to pay off the outstanding debt. Normally, it may be tougher to get a personal loan once Chapter 7 is discharged. But, that doesn’t mean you have to wait until after ten years though to be able to improve your credit score and get a loan.

In the end, when you can apply for a personal loan depends on your credit score. Thus, you just have to work on improving it.

If you want to know how to obtain a personal loan after bankruptcy, check this informative video by eHowFinance:


When getting ready to apply for a personal loan after bankruptcy, you have to take note of the following steps:

First, CHECK YOUR CREDIT REPORTS. Make sure to get copied of your credit reports, and ensure that all the information stated are correct.

For those with Chapter 7 bankruptcy, make sure that your debts are included and that a zero balance is shown in the report.

Meanwhile, for those with Chapter 13 bankruptcy, ensure that debt accounts are properly reported according to the payment agreed by you and the other party.

Second, PROVE YOUR CAPACITY TO PAY. When applying for a personal loan especially for an unsecured loan, you have to prove to the lender that you have sufficient funds to pay off for the debt.

One way to do that is by proving your income, rather, your capacity to pay. You may do so by showing pay stubs, W-2s, and other relevant documents. Include your side hustle or spousal income in the calculation. This way, lenders will see your application as less risky rather than a threat.

Lastly, KEEP AN EXPLANATION HANDY. Lenders would surely want to know the circumstances that led to the bankruptcy, and the remedies you have in settling the issue. So, make sure to prepare a letter that explains everything. One thing’s for sure, if the reason for your bankruptcy has something to do with medical billings or an unforeseen event, lenders may show a little consideration and grant you your application.

In addition, apart from the above mentioned, make sure also to compare terms from different lenders. Do not just settle for one. Line any other borrower, only settle for the best rates possible given your case/situation.


Now, let’s assume the lender has already approved your personal loan application. What to do next?

Before signing on the dotted line, it’s just right to do the following first:

  • Take time to read and understand the fine print. Since you have or had a bankruptcy, except that the terms lenders will offer may be less favorable for you. Thus, take time to read and feel if you are getting a reasonable deal before signing it off.

Normally, people with either average or poor credit are given an average annual percentage rate, which usually ranges from 18% up to 23% APR.

Before you sign, make sure that the interest rates, as well as the fees, are good with you. More so, compare it with other lenders, and see if it’s the best option you have.

  • Borrow only the amount that you need. You do not want to put yourself into trouble paying off a personal loan when you just had a bankruptcy, right? So, before you even seal a deal, make sure that what you are borrowing is just the right amount. Furthermore, it’s also wise to take out as much as you can afford to pay off on time. This helps a lot in rebuilding your credit score.


Now, what if the ball is not in your favor?  You did your best to get a personal loan, but you were denied. What will you do?

In the case of disapproval of a loan application after bankruptcy, here are a few options moving forward:

  • Apply for a personal loan with a co-signer. Having a co-signer who has strong credit and an excellent income history would greatly help for your personal loan application to get approved. However, this may be a little challenging. You got to find someone who’s confident enough that you can pay off the debt, because as you know, in the case that you are unable to pay, the co-signer will be the one responsible for paying back your loan.
  • Appeal to the lender. In some cases, you may consider appealing to the lender. Explain to them the whole situation why you ended up with bankruptcy. Tell them your story. Perhaps, by doing so, the lender’s decision will get reversed.  While this is a case-to-case basis, keep in mind that there’s totally nothing wrong with trying.
  • Get a secured credit card. If getting a personal loan is hard, consider getting a secured credit card instead. With credit cards, you are required to provide cash as collateral. The thing about credit cards is — many of them report to the credit bureaus, which is favorable for you as it helps build your payment history. Also, secured credit cards usually have lower interest rates than some personal loans given to those with bad or poor credit history.
  • Try credit-builder loans. There are smaller financial institutions out there that offer an option to borrow small amounts — up to $1,000. Basically, the money is deposited in an account that is owned by the bank. Then, you have to make monthly payments including interest. Before you make a transaction with such an institution, make sure that it makes regular reports to the credit bureaus to help in building your credit.
  • Work on building your credit. Let’s be realistic, this may take time, but you know, this is the best way to get approval for a personal loan. Unless you badly need the money right away, then take this route instead.


So, now that you already know how to get a personal loan after bankruptcy, keep in mind some things to watch out for before sealing a personal loan.

The world is far from perfect. That’s a fact. While some lenders out there have good intentions, others exist to take advantage of your circumstance.

Not because you were bankrupt and in need of money to start off, you will settle for whatever comes to your plate. Always remember that the last thing you want to happen is to not be able to pay off for your debts.

Be wary of lenders who process loans without a credit check, guaranteed approval, and immediate pay-outs regardless of your payment history. Generally, these loans come with higher interest rates, costs, as well as risks than any typical personal loans.

Those with “no credit check” loans tend to have high fees or high APR, which could lead you with a debt that you cannot afford to pay off.

Again, not because you need money, you will settle for this. It’s definitely not a win-win situation. In fact, you may just end up putting yourself in another troublesome situation.

Instead, consider looking for alternatives, which we have already shared with you earlier — look for a co-signer, appeal to the lender, secured credit card, a credit-builder loan, or better yet, work on your credit.


Getting bankrupt is a nightmare for some people. But for others, it’s just a phase that they need to survive.

We totally agree with that. Bankruptcy is not the end of the world, because there are still a lot of doors opening up for those who go bankrupt. In fact, you can start over by getting a personal loan!

You see, there are financial institutions out there who are very much willing to give second chances. And when you get one, make sure you do it right this time. Apart from borrowing money that you only need, be a good borrower by paying off your obligations on time.

Also, before you even start looking for a financial institution where to apply for a personal loan from, make sure that you know, you fully understand the process first on how to get a personal loan after bankruptcy. This way, you know your options, and of course, you know what to do exactly.

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