Chances are if you have told anyone you are considering bankruptcy, you have received a variety of reactions. Many people understand how helpful bankruptcy can be, but others assume the worst and believe bankruptcy is never the right option. In most cases, these are people who have never faced financial hardship and needed assistance getting back on their feet.
One of the most common warnings you will likely hear about bankruptcy is that it will destroy your credit score. To some extent, this is true. However, what people fail to consider is that based on your current financial situation, your credit score has already taken a dramatic hit and will continue to fall if the problem is not remedied. Bankruptcy will impact your credit score, but it can also wipe the slate clean and give you an opportunity to begin rebuilding your score in the months and years following your filing.
Why is Your Credit Score Important?
Your credit score is used by companies to determine whether or not you are a good risk. This can apply to lending you money, but it might also pertain to employment opportunities. Protecting your credit score is important, but there are instances in which the hit bankruptcy causes is worth it to move forward.
Determining the exact amount bankruptcy will affect your score is nearly impossible because it varies from case to case. The worse your current score the less impact filing for bankruptcy has. The average person ends up with a credit score of around 500 following bankruptcy, so if your score is already in that area, bankruptcy will cause little change. Read more from My FICO about how bankruptcy affects your credit score.
The important thing to remember is the faster your bankruptcy is over the sooner you can move forward and begin rebuilding your credit. No matter how much of an impact bankruptcy has on your score, it will not last forever. For many people, working toward better credit is only possible with the bankruptcy.
What the Future Holds after Bankruptcy
Bankruptcy remains on your credit report for up to 10 years, but the longer the time that passes between filing and applying for loans, the less it matters. A person filing for bankruptcy at age 30 that maintains flawless credit over the next eight years is more likely to be approved for a loan than a person who never filed that has ongoing credit problems. The goal is to get through the bankruptcy process and create a brighter financial future. It is possible to have outstanding credit even if you filed for bankruptcy at one time.
Want to know more about how bankruptcy will affect you? Contact the Law Offices of Robert M. Geller at 813.254.5696 to schedule your consultation.