Many people (understandably) shy away from the bankruptcy process because they are under the impression that filing for bankruptcy will tarnish their credit forever. This is a common myth, so if you’re under that impression, you’re certainly not alone. Thankfully, this is – indeed – a myth.
When an individual or a married couple files for bankruptcy, their credit does take a significant hit initially. However, the negative impact that bankruptcy has on one’s credit score is temporary. As long as that individual is responsible about paying their debts and rebuilding their credit score, their credit score could be higher than it was when they filed for bankruptcy within just a few years.
Although the bankruptcy itself will remain on someone’s credit history for between 7-10 years, the impact of this bankruptcy notation will fade over time. In fact, if someone files for bankruptcy and then fully takes advantage of their “clean slate” to become a responsible borrower in the wake of that filing, a lender may actually view the act of filing bankruptcy as a sign of responsibility and accountability instead of simply continuing to evade any kind of acknowledgement of one’s debts.
Additionally, it’s worth noting that benefitting from the debt forgiveness that bankruptcy provides may allow you to focus your income on repaying debts that are not dischargeable and otherwise shoring up your finances so that you have fewer reasons to assume additional unsecured debt. The positive shifts in your financial situation that filing for bankruptcy can inspire may allow you to avoid the kinds of borrower behaviors that drag your credit down in the first place. Also, by discharging your debts, you’ll no longer have their outstanding balances weighing down your credit history. You may be able to build up your credit score much faster than you would if you continued to have overdue balances unattended to in any way.
In short, while it is true that filing for bankruptcy will temporarily damage your credit, as an experienced bankruptcy lawyer – including those who practice at The Law Offices of Ronald I. Chorches – can confirm, doing so will certainly not ruin it forever and may even help you to rebuild your credit faster than you would otherwise be able to do.
Will the Benefits of Filing for Bankruptcy Outweigh Its Negative Consequences?
If you’re considering filing for bankruptcy, chances are that your financial situation is strained enough that the benefits of this process will outweigh the temporary damage that it will do to your credit score. If you already have a low credit score, you may even be in a “nothing to lose” kind of situation in re: bankruptcy.
With that said, if your credit score is stellar, you primarily owe secured debts, or you only owe one or two unsecured debts that you can’t pay reliably, there may be a debt-management strategy or debt-relief strategy other than bankruptcy that may better suit your unique financial needs.