Bankruptcy and Credit: How Digging Yourself Out May Be Easier Than You Think
It's true that bankruptcy negatively impacts your credit score; however, in this tumultuous economy, it is sometimes the only option for individuals to get out of debt and start anew. Bankruptcy may feel like rock bottom, but your credit might have been worse had you not proactively filed for bankruptcy, and instead chosen attempt to manage mounting debts on your own.
By filing for personal bankruptcy your credit may drop between 150-200 points. The plus side, however, is that you can begin to earn those points back through making consistent payments on your accounts going forward.
Without declaring bankruptcy, you may have developed a pattern of late or missed payments on multiple debts. Delinquent payments would register as late every following month. Consistently missed payments may cause your creditor to write the balance off as uncollectible and sell your debt to a collection agency.
Once your debt is at a collection agency they will also report late payments, and your credit score will take another hit. Finally, your creditors may sue you in order to collect payment. A lawsuit and judgment would also be recorded in the "public records" of your report, thus causing another negative impact on your credit rating.
Neither having a pattern of missed or late payments nor filing for bankruptcy is the ideal situation. For some people, however, bankruptcy may be the best option. Bankruptcy generally results in one significant hit to your credit, but then you can immediately start rebuilding. The alternative may just be to struggle with overwhelming debts and lose points little by little.
If you or someone you know is drowning in debt, talk to an experienced bankruptcy attorney today. A lawyer can explain your options and advise you about the best steps to take for your specific situation.
