The average person assumes filing for bankruptcy will damage his or her credit score, and while there is some truth to this, but what many fail to consider is those considering bankruptcy likely don’t have a great outlook to begin with. It’s possible to fix this and filing for bankruptcy might actually be your fastest path to improved credit.
The best thing you can do if you are experiencing financial challenges is to honestly assess your situation. How bad are things really? If you think you can get back on track in a few weeks or a month or two, bankruptcy might not be necessary. However, if your financial struggles have been ongoing and you know your credit has already suffered, bankruptcy could actually help you restore your credit score.
What are a few of the most important reasons bankruptcy could be an option if you are concerned about your credit?
Credit Does Not Equal Cash
Having a strong credit score is important, but it’s not going to pay your bills or prevent foreclosure. Your most important concern is paying your debts in a timely manner. Your credit score is important if you are seeking a loan, which might be a solution for solving your financial struggles, but it’s important to realize your credit score is not cash in your pocket or bank account.
Improving Your Debt to Income Ratio
One of the most powerful tools you have available for helping with money problems is bankruptcy. Bankruptcy resets your debt ratio, which is an important part of your credit score. In Chapter 7 bankruptcy, much of your debt is eliminated, which means your debt-to-income ratio improves. This won’t give you a perfect credit score, but it can provide a small improvement, which can be important when you are slowly working toward financial improvements.
To learn more about how credit scores are calculated, visit this tutorial from Equifax.
It might be best to consider bankruptcy a “long game,” which means patience will eventually pay off. Your goal is not necessarily to have a high credit score, but an overall healthy credit profile. In the long run, bankruptcy can help you get there and demonstrate you are a smart risk for lenders.
Bankruptcy Provides a Fresh Start
Financial problems are stressful and not being able to pay your debts can lead to a number of problems in your life. Bankruptcy offers a fresh start and can put you back on track. If you are tired of dealing with years of debt that feels as if it never gets more manageable, bankruptcy provides a path to financial freedom. For many, filing for bankruptcy is the fastest and only way to improve their credit score.
If you would like to learn more or discuss your financial situation with someone who understands the bankruptcy process, we can help. To schedule a time to speak to a qualified bankruptcy attorney, contact the Law Offices of Robert M. Geller at 813.254.5696.