Bankruptcy is usually thought of as a bad thing. This is mainly because it involves a legal declaration that an individual or a business is unable to repay their debts to creditors. It also ruins your credit score significantly and can make it challenging to secure loans, mortgages, or favorable interest rates in the years following the bankruptcy.
However, bankruptcy may not be all that bad when you think about the long term. Think about it– if bankruptcy only had downsides to it, people would not opt for it at all. Bankruptcy laws are meant to provide debtors with relief and give them a fresh start. If you are considering bankruptcy, speak to bankruptcy attorney Corey Mills today.
Here’s how bankruptcy can improve your credit score
It is true that bankruptcy takes a hit at your credit score in the initial days. However, it is helpful in the long run if you live on a practical budget and maintain your finances.
When you are struggling to pay bills and have nowhere left to go, bankruptcy can come in and save you from creditors by discharging the debts. It allows you to get a fresh financial beginning without the fear of going to jail. All of this does come at a price. Your credit score is ruined, and you may not be able to secure loans in the future that easily.
However, it all comes down to how you manage to rebuild your financial health.
After a successful bankruptcy, all of your debts will be listed as “discharged through bankruptcy,” and your collections will be listed as “resolved.” Also the elimination of less-than-favorable payment history will also occur.
In the future, those who will take a look at your credit history will know that you were in a poor financial situation and had to file for bankruptcy. However, they will also know that you took accountability and did something to resolve the issue instead of running away.
Moreover, if you manage to pay your credit card and other bills on time following your bankruptcy, you can build your credit score again. It may take some time, but consistency will lead you to success eventually. Once you have rebuilt your credit score, lenders will be more likely to trust you and approve you for a loan.
In contrast to this, if you choose not to file for bankruptcy and continue to miss your payments, your credit score will keep deteriorating, leading to further negative impacts on your creditworthiness.