Chapter 13 bankruptcy allows you to get out from under an insurmountable debt that you cannot pay and also allows you to keep some assets, such as a home or car, provided you have a structured repayment plan that is acceptable to your lenders. However, having an open Chapter 13 bankruptcy can be a death sentence when you're trying to apply for a loan. Most lenders won't consider applicants with an open bankruptcy. Here is a comprehensive guide on some methods you can use to obtain a loan even if you have an open Chapter 13 bankruptcy.
Be prepared to explain your bankruptcy in detail to a lender. Have documentation showing the details of your bankruptcy proceedings available to provide to a lender when making your loan application. The more documentation you can provide showing your ability to repay a lender, the more seriously your application will be evaluated.
Have collateral on hand. Assets that are not pending under the bankruptcy ruling are the only assets that a lender might consider. Personal valuables, such as jewelry or antiques, are a way to collateralize a loan. Have those valuables appraised and be ready to show that documentation to a lender.
Talk to a cosigner with great credit. Having someone willing to apply for a loan with you as a cosigner can be the factor that gets you an approval for your loan. Your cosigner should be completely aware of your bankruptcy proceedings and be willing to be liable for repayment in the event you cannot repay and go into default.
Talk to friends and family. Find someone in your life who might be willing to provide you with a personal loan or take out a loan on your behalf. Show him or her that you are serious about repayment by having a contract drafted showing your repayment proposition.
Get a secured credit card. Even in open bankruptcy cases, many companies will offer a secured credit card to applicants who put up cash as collateral to use in the event that they default or fall behind on payments. While limits typically start out small, they can grow over time with a good payment history.
Prior to declaring bankruptcy, it's best to attempt to be in a position of not needing to borrow money for quite some time.
Don't expect the road to a loan with an open bankruptcy to be easy. While it is possible, it is much more difficult and requires much more personal effort and commitment.