Let's look at this from the third person point of view.
If you are behind on your payments now and want to borrow money from me, I'm not going to lend it to you if you truly are "in debt" and behind on payments for your existing debt.
If you file bankruptcy, then I'm not going to lend you money either. However, once the bankruptcy proceedings are completed and debts are either satisfied, reduced or written off, feel free to give me a call and I will at least consider loaning you money. While there are many factors I will consider, the first one I look at is the type of bankruptcy you filed for. Chapter 7? Chapter 11 or Chapter 13? Depending on which chapter, filing bankruptcy again is not an option to you for a minimum of 2 years.
If I do agree to loan you money, I can guarantee you three things.
Basically, if you're filing bankruptcy then your credit is pretty well dinged up already. All a bankruptcy filing will do is put another dent in that bell. So if you can't get a loan with 3 dings, why would I give you a loan with a 4th ding caused by a bankruptcy filing?
1) I want physical collateral of at least the value of what I am lending you. No collateral, no loan. Period.
2) The interest rate I charge you for the borrowed money will be high.
3) If you're late with one payment, you are defaulted on the loan and your collateral is mine to do with as I please, with no recourse.
November 2016 I filed Chapter 7; before I filed my credit score was 567.
I checked in January 2017 and my score was 592.
Debts still showing was my 77k student loans, and I was an authorized user on a friend’s Capital One card with 2k limit and 90% utilization but with good on-time payment history.
I removed myself as an auth user on friend’s Cap1 card in February because it was hurting me more than helping and my score jumped up to 652 in April, which was surprising to me.
I followed the norm advice of applying for a secured credit card. I actually got 2 secured cards, one with Discover for 200 and one with my credit union for 500, both in May 2017.
I used it throughout the month to full limits but paid it off in full before the bill cycle date.
February 2018, Discover automatically gave me my security deposit back and increased limit to 2000; credit union I had to make a request for it back and they granted it plus raised limit to 2500.
Throughout those 2017-18 months my score would go up and down between 1-15 points just about every week.
I applied for a unsecured personal loan in May this year and got approved for 10k, which is what I asked for so not sure if I would’ve been approved for more.
I see this is getting long so I’ll close with I believe if bankruptcy can be avoid, then avoid it because it’s on your profile for 10 years, but if it’s necessary to use that option I don’t see anything wrong with it so long as your doing so to not be back in the same poor money management situation as you were before.
Also, you must be someone who can be patient because the rebuild process is turtle slow. My limits certainly aren’t impressive, but it’s all the banks are willing to give me being I had a major ding less than two years ago, so I’ll take it.
"I removed myself as an auth user on friend’s Cap1 card in February because it was hurting me more than helping and my score jumped up to 652 in April, which was surprising to me."
Just as an aside, one quick thought here Sir... I suspect the 90% utilization was the issue, as level of debt/credit utilization is a 23 - 30% factor influencing your score.
So while there's a theoretical hit from removing the length of credit/credit history from your score (but removing the account from consideration), it was clearly offset (and then some) by the reduction in utilization!