It is a commonly held belief that after someone experiences personal bankruptcy, he or she will never have credit again. This is simply not true. While the process of building up one’s credit after bankruptcy takes time, it is definitely possible.

In fact, as the housing market in the U.S. recovers, many lenders are now working again with borrowers who have less than perfect credit. These new loans won’t be the same as the subprime loans of the past, which often offered 100 percent financing even to those who were unemployed or unable to pay. The loans may, however, be available with a down payment and a higher interest rate to those who have lower credit scores or even a foreclosure.

A lot of people hesitate to speak to a bankruptcy attorney or to begin the bankruptcy process because of fear over what it will do to their credit scores. However, often those same people have already lost their good credit rating due to wage garnishments, collections and foreclosure. Bankruptcy will generally remove all or most of one’s debt. That means it will also stop garnishments, collections and foreclosures.

Because a person who has filed for bankruptcy is subsequently considered debt-free, credit offers will soon start appearing. While the interest rates may be higher, credit cards and car loans will be available shortly after bankruptcy and can be used as a means to establish credit. By diligently making payments, a person who has filed for bankruptcy can start seeing improvements to his or her credit. After two years without any further credit problems, one should be able to qualify for an FHA loan for a house.

Bloomberg, “Misfit Borrowers Attracting Lenders as Housing Revives,” John Gittelsohn and Prashant Gopal, July 18, 2013