If you choose to file for bankruptcy, it will affect your credit — but not for the rest of your life. Remember, bankruptcy was created as a second chance for the hardworking people who happened to face hardships along the road of life.
The word bankruptcy is often associated with negative ideas like irresponsibility, financial distress, and loss of property or possessions. However, people who have gone through the process might offer different associations like relief, financial security, and a new beginning. Filing for bankruptcy isn't a decision to be taken lightly, but it provides relief from overwhelming debt.
If you've been struggling with debt, you've probably heard all of the problems bankruptcy can cause. Many of these ideas are myths. In fact, these ideas are often used as scare tactics by debt collectors to force debtors to agree to unreasonable monthly payments which force the debt spiral to continue. Bankruptcy does have a big impact on your credit score, but it can be a necessary path back to financial security.
There are many myths and misunderstandings surrounding the bankruptcy process. These are some of the most common:
If you choose to file for bankruptcy, it will affect your credit. However, it won't impact your score for the rest of your life. It's important to remember that bankruptcy was never designed to be a punishment for people who couldn't pay off debt. It was created as a second chance for the hardworking people who happened to face hardships along the road of life.
Most of the people who come to us for help haven't maxed out their credit cards because they wanted extravagant new possessions. Instead, their lives were interrupted by a medical emergency or a company that dissolved. Bankruptcy is a second chance that involves short-term sacrifices and hard work. However, it can offer you the long-term financial success you deserve.
[Bankruptcy will impact your credit score, but there are steps you can take to rebuild. Watch the video above to see how.]
There is no doubt that filing for bankruptcy will lower your credit score. It will be a big drop too... at least for the short term. A good score (over 700) can drop as much as 200 points or even more. A medium score (around 680) may drop around 150 points. It's impossible to calculate exactly how much your score will drop without taking all of the factors of your current credit score into account.
While it's true that bankruptcy will remain on your credit report for 7 to 10 years, your credit score won't be dismal the entire time. Practicing good credit habits, like getting a secured credit card and making payments on time, can help you rebuild your credit even while the bankruptcy report still exists. With careful planning and hard work, it's possible for some people to reach the "good credit" level within 2 to 5 years after filing bankruptcy.
Rebuilding your credit after bankruptcy is possible. In fact, it's an important part of the bankruptcy process. The purpose of bankruptcy is not simply to discharge your debt. The ultimate purpose is to rebuild good credit and achieve financial security.
[Filing for bankruptcy will impact your credit score, but not for the rest of your life. Start rebuilding your credit now with our free Life After Bankruptcy guide.]
If bankruptcy didn't completely eliminate your debts, now is the time to pay them off. Pay off debts with the highest interest rates first. Aggressively pay off these debts by curbing spending. Avoid impulse buys, cut unnecessary living expenses, and consider a side job to earn extra income.
Adding new credit (the right way!) is one of the best ways to rebuild your credit. Secured credit cards and small installment loans can offset negative information on your credit report. Responsible payment habits and keeping credit balances low will also help build positive credit.
[To reestablish your credit, you need credit sources to report to credit bureaus so you can create some credit history. Your rent payment could be one of these credit sources. Watch and learn how here.]
Emergencies are impossible to avoid. However, you can work to become more prepared. Invest in quality health insurance to avoid unanticipated medical expenses. Create a budget and add some money to a savings account each month. Avoid spending debts by focusing on necessities, saving for large purchases, and limiting credit card use.
Make an effort to increase your income with a change of employment or working toward a raise at your current job. Consider seeking higher education to advance your workplace value.
If you live in South Georgia and are considering bankruptcy, the expert attorneys here at Woodall & Woodall are here to help. We understand what it feels like to be drowning in debt, and we have the experience to help you beat the seemingly endless struggle. There is a way out. Not only can you eliminate your debt, but our Life After Bankruptcy program can help you get back your financial footing.
If your debts are taking over your life, don't face the struggle alone. Contact us today for a free consultation or give us a call at 229-247-1211. Get on the road to financial recovery and find your new beginning.