Can you get a loan after individual bankruptcy

What does the law say about this?

Let us turn to Article 213.30 of Federal Law No. 127-FZ dated 26.10.2022 "On Insolvency (Bankruptcy)". According to it:

1. Within five years after completing the procedure, when applying for new loans, a citizen is obliged to notify credit institutions of their bankruptcy.
2. Re-initiating the procedure can occur no earlier than five years from the date of termination of the bankruptcy proceedings.
3. For three years, a citizen is not entitled to hold management positions in the governing bodies of a legal entity.
4. For ten years, they are not entitled to hold management positions in the governing bodies of a credit institution.
5. For five years, they are not entitled to hold management positions in the governing bodies of an insurance organization, non-pension fund, management company of an investment fund, unit investment fund and non-pension fund, or microfinance company.

Thus, the law says nothing about a citizen not having the legal right to take out loans after being declared bankrupt. In practice, they can apply for a new loan the very day after the procedure is terminated. The only question is whether banks will cooperate with them.

Will the bank find out about the bankruptcy?

First of all, as we have already found out, a citizen is obliged to notify credit institutions about undergoing the bankruptcy procedure within five years from the date of termination of proceedings.

The bank has the right to cancel the loan agreement if the borrower concealed a recent bankruptcy. 

In addition, information about the inability to pay debts is necessarily reflected in the borrower's credit history. According to paragraph 3.9 of Article 5 of Federal Law No. 218-FZ of 30.12.2004 "On Credit Histories", the financial manager is obliged to provide information about the details of the procedure to the credit history bureau where the citizen's credit history is formed, or to any bureau if the borrower has no credit history.

In practice, however, financial managers do not always fulfill this requirement and transfer information to the credit history bureau. One way or another, we do not advise concealing bankruptcy even if there is no corresponding entry in the credit history.

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Is it possible to get a loan after an individual's bankruptcy?

As we have already found out, the law does not prohibit borrowers from applying for loans even in the event of bankruptcy. Therefore, the decision to cooperate with a citizen rests entirely with the lender.

Whether the bank will approve a loan to a bankrupt is a debatable question. Many factors influence the final decision on the application: the citizen's current financial situation, their debt load, how they fulfilled obligations on previous loans, and so on.

Let's be frank, banks are extremely reluctant to cooperate with people who have initiated bankruptcy proceedings, even after many years. In all likelihood, the lender will refuse to cooperate with the bankrupt borrower. However, the bank cannot prohibit applying for loans.

How soon after bankruptcy can you apply for a new loan?

You can apply for a loan the very day after obtaining bankrupt status — the borrower has no restrictions in this regard. But since a citizen is obliged to notify creditors of their situation within five years after the termination of proceedings, we do not advise rushing to apply to a bank.

A wiser decision would be to build a positive credit history over the same five years. Of course, the bankruptcy record will not disappear anywhere, but at least the borrower will be able to improve their reputation in the lender's eyes.

Here are some recommendations for future bank customers:

1. Decide which bank you would like to get a loan from and open a salary account there. This way, your future lender will see your cash flow.
2. After a short time, apply for a credit card with a small limit at the same company. Timely repayment of the debt will show you as a reliable borrower.
3. Try to take out a loan for any inexpensive item. The approval rate for such loans is significantly higher, so you have a chance of a positive decision. In addition, point-of-sale loans also improve credit history provided the debt is paid on time.
4. Try not to apply to microfinance organizations. Banks have a very negative attitude towards borrowers who regularly take loans from microfinance organizations.

How to get a loan after bankruptcy?

In general, the loan application procedure for a bankrupt and a borrower with a good credit history is the same. It differs only in a number of nuances:

1. Before applying for money, the borrower should increase their credit rating. We wrote about how to do this just above.
2. You should not apply to the bank whose loan caused the bankruptcy — the organization will refuse to cooperate anyway, and the record of the application will appear in your credit history.
3. When applying for a loan, it is better to provide the bank with collateral: real estate or a vehicle, or a guarantor with a good credit history. Having a guarantor will significantly increase the likelihood of approval.
4. You should not apply to several credit institutions at once. In case of a negative decision on the application, the best option is to take a pause of several months.

Why do banks refuse loans to bankrupts?

In fact, it is not surprising that credit institutions are wary of cooperating with people who have previously managed to officially get rid of their debts to other banks.

Reasons for refusing a loan to a bankrupt may include:

• concealment of information about undergoing bankruptcy proceedings by the borrower;
• lack of any property that could serve as collateral;
• lack of positive records in the credit history after obtaining bankruptcy status;
• mass submission of applications to other credit organizations;
• insufficiently high salary and so on.

Where can you apply for a loan during an individual's bankruptcy?

A bankrupt borrower has the right to apply for funds to any credit organization. However, large banks are extremely likely to refuse cooperation with a person who has had problems repaying debt in the past. Established lenders do not experience a shortage of potential borrowers and therefore approach client selection more carefully. Therefore, it is worth trying to get a loan from small or new organizations.

Bank name	Loan amount	Loan term	Interest rate
Let's go!	from 100,000 to 275,000 RUB	13 months	from 6.6% per annum
BystroBank	from 9,000 to 299,000 RUB	from 1 year to 5 years	from 12% per annum
LOCO-Bank	from 500,000 to 15 million RUB	from 3 to 7 years	from 5.5% per annum

Let's go!

• loan amount: from 100,000 to 275,000 RUB;
• loan term: 13 months;
• interest rate: from 6.6% per annum.

Poydem! offers far from the most attractive terms for borrowers and therefore often approves applications for bankrupts. In this organization, it is possible to take out a small loan in the amount of 100,000 to 275,000 RUB for a term of 13 months. The interest rate here is floating: from months 1 to 3 of repayment it is 29% per annum, from months 4 to 6 it is 27%, from months 7 to 9 it is 25%, and from months 10 to 13 it is 6.6%. Since the overpayment decreases as the debt is repaid, the full cost of the loan is higher than stated in the advertisement—up to 26.121% per annum.

BystroBank

• loan amount: from 9,000 to 299,000 RUB;
• loan term—from 1 year to 5 years;
• interest rate — from 12% per annum.

The interest rate here is higher than that of competitors. While other banks offer borrowers loans starting from 4.9%, BystroBank issues money at a minimum of 12% per annum. At the same time, the loan amount here is very small—up to 299,000 RUB. The bank's advantage is that it issues money onto its own credit card, which guarantees the borrower a revolving credit limit and a grace period of up to 50 days.

LOCO-Bank

• loan amount: from 500,000 to 15 million RUB;
• loan term — from 3 to 7 years;
• interest rate — from 5.5% per annum.

At Loko-Bank, it is possible to get a loan in the amount of up to 15 million RUB for a term of up to 7 years. The credit organization states that the minimum interest rate is 5.5% per annum. However, this is not entirely true. In the fine print, the bank clarifies that the rate starting from 5.5% can be applied once over the entire loan term for one monthly payment at the borrower's initiative when purchasing a voluntary personal insurance policy.

Let's sum up

One way or another, bankruptcy affects a borrower's reputation. In the future, a citizen will find it extremely problematic to get a loan from any bank. Moreover, in this case, it does not matter how long ago the bankruptcy procedure was initiated.

All a borrower can do is slightly increase their chances of receiving a positive decision on their application. Finally, here are a few tips on how to do this:

• apply for a loan with a co-borrower—ideally a spouse;
• provide valuable property as collateral—real estate or a vehicle;
• get a job with an official white salary;
• build a positive credit history through a credit card and POS loans.