For those who have navigated through tricky financial waters, the times can be stressful and certainly upsetting. And when such circumstances lead to an inevitable bankruptcy the stress can be compounded significantly. The fact of the matter is, however, that sometimes filing bankruptcy is the only way out of a very bad situation. While it’s true that a bankruptcy can remain on a credit report for quite some time – typically seven to ten years – it can also offer an effective, albeit last ditch, choice for wiping the financial slate clean and taking advantage of a second chance.

Bankruptcy does allow consumers to start over but it’s not a speedy process. Rather, creditors are paid off which allows consumers to start from scratch but credit is withheld for many years because of the bankruptcy on the consumer’s credit report. The three major credit bureaus – Experian, TransUnion, and Equifax – collect pertinent financial information on consumers; the combination of this information is what is used to determine a consumer’s credit score – the number that lenders use to determine creditworthiness. A bankruptcy on a credit report can significantly inhibit the lines of credit that a consumer may be able to receive. But after a few years, a consumer may be ready for secured credit cards.

Secured credit cards allow consumers to get back into the credit game. They are like traditional credit cards but with the caveat of collateral. The consumer must deposit funds – matching the amount of their line of credit – into a secure savings account held by the lender. Subsequently, should the consumer default on their payments the lender has the option of collecting the funds from the savings account.

Secured credit cards protect the interests of both the lender and the consumer and can effectively be the first baby steps on the road back from bankruptcy.

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