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Consider bankruptcy loans to be broadly divided into three separate
categories: mortgages, secured, and unsecured. The lowest interest rates
are available for homeowners, either on a first or second mortgage, or a
home equity loan. Real estate is the preferred collateral for most
lenders. Entering the second tier, bankruptcy loans after filing and
discharge are also widely available if secured by personal property. The
preferred collateral is financial products held by third parties. The
last group - unsecured bankruptcy loans - are available, yet the
interest rates charged are among the highest requested. Almost no
lenders offer bankruptcy loans while a case is pending.
After filing bankruptcy, credit scores drop predictably and tend to
bottom out shortly thereafter. As each month passes after receiving a
discharge (the end of the case in all chapters), FICO scores and credit
scores tend to recovery slowly so long as no further adverse entries
appear. In as little as 24 months, many creditors enjoy better credit
ratings and credit availability than during the years leading up to
filing bankruptcy.
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