When considering filing for personal bankruptcy, many Arkansas residents are concerned about how the move will impact their credit standing. This is understandable, as having a solid credit score is the key to attaining future lines of credit, favorable interest rates and the ability to purchase a new home or vehicle. However, the manner in which many consumers think about bankruptcy and credit may be flawed.
It is undeniable that filing for personal bankruptcy will lead to a drop in an individual's credit score. However, for most consumers facing bankruptcy, their credit report has already sustained a number of dings in the form of late payments, high balances and other issues. Scores are often low in the months leading up to bankruptcy, which means that the hit one's credit will take after the action is filed is minimal.
In addition, consumers are able to begin rebuilding their credit rating as soon as their bankruptcy is discharged. This can result in greatly improved scores within a year or two after filing. On the other hand, those who postpone filing and try to pay down their debts on their own will have a much slower pace of progress when it comes to credit repair. At the end of the day, those who seek bankruptcy can attain a favorable credit score in a much shorter timeframe.
For those in Arkansas who are considering bankruptcy relief, it is important to take a holistic view of the process. Yes, credit scores will decline following a bankruptcy. However, for many people, the benefits obtained through the elimination of many types of consumer debt far outweigh the negatives.
Source: Investopedia, "Bankruptcy And Your Credit Score", Caitlin Kelly, Oct. 7, 2014