One major concern individuals in Kansas City may have when filing for bankruptcy is how it will affect their credit score. However, it may come as a surprise that filing for bankruptcy does not hurt one’s credit as much as one may think it does.
For many people struggling with debt, the only alternative to bankruptcy is to default on one’s mortgage, credit cards and other loans. The truth is that insolvency in these situations leads to credit judgments. In these situations, not only can a person’s credit score tank, but they may find that they are also unable to open new credit lines.
Compare this to bankruptcy. Although a bankruptcy judgment will remain on a debtor’s credit history for a decade, it usually will not stop a debtor from being able to obtain credit during that entire time. In some cases, after filing for bankruptcy, it is possible for some debtors to get a home loan with a decent interest rate within a few years.
So how can one tell whether they should file for bankruptcy? Here are some signs. One sign is if one is using credit cards to purchase gas, groceries and other necessities. One may be waiting for their financial future to improve, but may soon find that they are unable to meet their ever-growing credit card payments.
Another sign is if one is considering cashing out their pension, 401(k) or other retirement plan. This could lead to one’s creditors getting ahold of these essential funds, leaving a debtor financially drained.
In addition, sometimes a debtor will attempt to negotiate a mortgage loan modification, so that they can keep paying their credit card bills, while their mortgage is on hold. Also, if one simply has too many financial plates in the air and can’t afford to meet all their financial obligations, bankruptcy may be a good option.
As you can see, there are benefits to filing for bankruptcy. It is natural to be concerned about how bankruptcy will affect one’s credit. Nonetheless, considering the alternative of defaulting on one’s loans and how that will negatively impact one’s credit score, filing for bankruptcy may make sense.
Source: The Huffington Post, “The Fresh Start of a Bankruptcy May Restore Credit Faster,” Richard Gaudreau, March 6, 2015