So, you’ve had some difficult times and have decided to declare bankruptcy. You’ve done the research, been through the process and understand the consequences. It was the right decision for you, but you know it means your credit score is now completely ruined. You can forget about ever getting a loan for a home, a car or a credit card with a reasonable interest rate, right?
Well, hang on. There are actually a lot of misconceptions about what bankruptcy means to your credit rating. Though there will no doubt be some negative effect on your credit score, most of the dire warnings about what will happen have been put out there by credit card companies who have the most to lose.
Consider this: If you decided to declare bankruptcy, chances are your credit score was already fairly low. If you were struggling to pay bills and creditors were being neglected, you were doing more damage to your credit by continuing the downward spiral than you did by declaring bankruptcy, taking the opportunity for a fresh start and working hard to rebuild your finances.
Conversely, if you have a good credit score, but you’ve run into major (possibly unexpected) debt that put you in financial stress, it’s true that bankruptcy will hurt your good rating more than if it was already low. You should consider your options and whether it’s better to be proactive rather than reactive. If you know that the financial burden is going to be too much, it may behoove you to nip the downswing in the bud sooner rather than later.
Remember, once you’ve declared bankruptcy you have the chance to start building your credit back up from a place where you can deal with your finances again. But also keep in mind that every situation is different, and it’s a smart move to consult an attorney before making potentially life-changing decisions. For more information on how we can help, please contact us here!
photo credit: Bryan Rosengrant via Flickr cc
