Validation! A foreclosure may actually make you a prime target for credit offers!
Finally, there's some great news for those who believe they have been financially ruined because of a foreclosure! I recently filed a bankruptcy for a client who besides a foreclosure had excellent credit. She had no intention or desire to discharge her credit card balance (approx. $2,000) and she did not want to file bankruptcy; but a life event made her home unaffordable, leaving her with few other financial options.
As her bankruptcy lawyer, I advised her to stop using her credit card but to also go ahead and pay off the balance prior to filing her bankruptcy. Her hope (and mine) was that it would not hurt her credit as bad if she only filed for bankruptcy because of the foreclosure on her home. Sure enough, even before her discharge, she called to let me know she was given a credit card offer and approved!
Normally, as a bankruptcy attorney , I am not excited about clients obtaining credit cards after filing for bankruptcy because I do not want them to be back in the same place again; but this was a special case. I was excited in this situation because I knew she was (and would continue to be) financially responsible; plus, the credit card would make her life more financially manageable. In my mind, she was not a risk to get caught back up in the web of debt, but still thought it was just an anomaly.
My mindset changed today when I stumbled across another article with the headline from the TransUnion 2011 Financial Summit entitled “Life after Foreclosure and Hidden Opportunities. " Finally, my logic as a bankruptcy attorney was actually shared in writing! The materials discuss the recession and the credit risk posed by those who defaulted on mortgages. An excerpt read:
"The ability to identify ‘life event’ mortgage defaulters versus chronic defaulters can open up profitable low-competition target segments. “
Thank goodness, too! As a bankruptcy lawyer , I can't see who else are they going to lend to after this foreclosure mess! In all seriousness though, I do think this is positive news for many consumers in jeopardy of bankruptcy due to an underwater mortgage. Credit is important, and to be constrained by a negative account is frustrating and often unduly excludes low-credit risk borrowers. Bad things happen to honest people and they need a fair opportunity to start over. I am glad it appears the trend is to take that into consideration even if the bottom line is still understandably profits over compassion.