By Janet Alvarez, CNBC + Acorns Contributor
High levels of debt and historically high unemployment rates, exceeding 10% in many states, have left a growing number of Americans unable to pay their debts and contemplating
personal bankruptcy
.
Although bankruptcy can offer a fresh start for many debtors, it is important to be aware of certain restrictions and limitations that they may face for years after filing for bankruptcy.
Here are some of the most common limitations debtors encounter after bankruptcy:
Can I rent an apartment?
Renting an apartment in the first few years after bankruptcy can be a special challenge;
Many professionally managed large apartment complexes do not rent to people with a recent bankruptcy history, and if they do, they will often charge additional security deposit fees or require several months of rent in advance.
On average, it takes 2 to 4 years after bankruptcy to make renting easier.
Renting may be easier with an individual owner or in smaller apartment buildings, but you should be prepared in any way to explain your bankruptcy and offer an additional security deposit or rent up front.
Try to find an apartment that you like before bankruptcy and stay there for at least a couple of years.
You can avoid the hassle of looking for a new place with a recent bankruptcy, and you can also rebuild your credit.
You can also sign up for a paid rent reporting service, like RentTrack or RentReporters, which will report your rent payments on time to credit bureaus, helping you get your credit back faster.
See also: Do not sink with quarantine, follow these steps to save in the middle of a crisis
Can I get a mortgage?
Your chances of getting a traditional mortgage improve 3-4 years after bankruptcy, but you still need to be prepared to find higher interest rates or make a higher down payment.
Home loans from the Federal Housing Administration and the Department of Veterans Affairs are usually available two years after a Chapter 7 cancellation or one year after a Chapter 13 cancellation. In either case, you will need to show that you have improved your credit, that you are paying your bills and managing debt on time, and that you have enough income to manage your mortgage payments.
Photo: Getty Images
Can I get a credit card?
Although traditional credit cards may be out of reach for a few years, you can speed up the process by applying for a secured credit card.
It requires a refundable security deposit that works like your line of credit, so if you deposit $ 500, you can receive a line of credit for the same amount.
After approximately 12 to 18 months of on-time payments to your secured card, you should start receiving offers for traditional cards.
Can I open a business?
Although there is nothing to stop you from starting a business after bankruptcy, loan financing can be very difficult to obtain for a few years.
Banks and online lenders are generally reluctant to lend money to those with a history of bankruptcy.
Some sub-prime lenders offer secured loans, which are secured by an asset you own (like your car), but consider the risks involved, as well as the high interest rates.
It is better that you save to have your own starting capital or ask friends and family for help, you can also look for a business partner with good credit who can obtain a loan for the business.
Will I have trouble looking for a job?
Although many employers require background checks on their employees, a bankruptcy will not necessarily disqualify you for the position.
The exception, of course, is if you are looking at a job in finance or accounting, or any role in which you manage money or financial information.
Still, a bankruptcy can negatively affect even other professions, so having a ready answer to any question is important.
If your bankruptcy was caused by an event beyond your control, such as a layoff, divorce, or illness like COVID-19, employers are more likely to be more lenient.
Whatever the reason for your bankruptcy, it is important to emphasize that the past is behind you and demonstrate the steps you are taking to rebuild your credit and have a stronger future.
And that kind of fresh start is precisely what bankruptcy promises.
See also:
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The inverted yield curve could indicate yes
How to overcome a family economic crisis in 5 steps
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