Bankruptcy can sometimes be a good option. Even though bankruptcy is seen primarily negatively in the media, it isn’t actually all bad. Bankruptcy can be the best option for various people in different circumstances.
Credit companies often state that bankruptcy is one of the worst things you can do for your credit, and that’s partially true. There is nothing that damages your credit score quite as fast as going through bankruptcy. However, if you don’t take a bankruptcy, it’s still possible to damage your credit severely.
Even though you’ll initially see a major impact on your credit, it won’t last forever. In fact, you can begin rebuilding your credit immediately. Within around one year, you’ll find yourself in a better position than before, and you’ll have a stable financial outlook to match.
How much will a bankruptcy help?
It depends on where you start. On average, those who file Chapter 7 bankruptcy have credit scores of around 538.2. Within around six months of the cases being discharged, the average score had climbed to 620.3. FICO has shown that some people have the same or slightly better scores after bankruptcy.
Why choose bankruptcy if your credit score won’t change much or at all?
There are other reasons. You won’t have people calling you at all hours to try to collect past-due bills. You can balance your income and stop worrying about not having the money you need to pay bills. Over time, your score will improve, and you’ll be able to do more with better financial stability.
If you think a bankruptcy is right for you, your attorney can help you file. It is the best option in certain situations.
Source: NerdWallet, “When Bankruptcy Is the Best Option,” Liz Weston, accessed Aug. 22, 2017