Dispelling Another Myth: Filing for Bankruptcy Does Not Adversely Impact Your Financial Future

In the meantime, you’re getting wage garnishments and calls and other harassments. Another reason people delay filing is that they are nervous about the impact on their credit.

There’s this sort of other myth that’s perpetuated by the credit card industry and creditors in general. They want you to feel like if you file bankruptcy, it’s going to trash your credit forever, because they don’t want you to file bankruptcy

Bankruptcy Protection Affords You Time to Rebuild Your Credit

The truth is that people who come in to see me, their credit is already pretty much trashed. I hate to say it that way, but it’s so bad that if they don’t file bankruptcy and get help, they are never going to repair their credit because they are never going to come up with the extra money to pay off the debt and get it back to a place where it can repair.

On the other hand, if you file bankruptcy you get out of debt, like you were saying, pretty much immediately, and you can begin to repair your credit.

Bankruptcy Filing Will Stay on Your Credit Report for 10 Years but in That Decade, You Can Begin to Restore Your Credit

The bankruptcy filing will stay on your credit report for 10 years, but in the meantime, your credit score is being repaired.

The bankruptcy filing will hamper it, but you’re still going to be better off than you would if you were trying for years to catch up with this debt and get back on track so that you could start repairing your credit.

Could Bankruptcy Filing Help You End up with a Better Credit Score than before You Filed?

Interviewer: I heard that bankruptcy actually, to many people’s surprise, helps your credit because certain lenders, like auto lenders, that look at someone that just filed as a good risk because they can’t file again for eight years, and they have a lot more means to fulfill other obligations. I’ve heard of people getting loans after bankruptcy that they couldn’t get before.

Court: Yes, that’s true. Under the bankruptcy code, once you receive a discharge, you won’t be able to get another discharge in bankruptcy for eight years. Anybody that’s going to lend you money knows that, so they feel more secure that their debt isn’t going to be extinguished in bankruptcy.

Typically, once somebody files bankruptcy, they will receive a large number of offers, typically from auto loans and credit cards. It can actually get a bit annoying, getting deluged with people wanting to lend you money once you file bankruptcy, which is sort of ironic.

If you’re responsible about how you borrow money, it can help a lot to rebuild your credit and help you get a car and qualify for other credit. So it can be beneficial to you as well.

Could Bankruptcy Filing be the Best Step toward a Better Financial Future?

Interviewer: Really, if you reframe it, bankruptcy could be one of the best things you ever did because it can save you years of financial hardship. It can put you on the path to improving your credit, which is bad, and relieve the stress of people calling you. It seems like it could be one of the best things you could ever do, perversely, instead of a bad thing.

Court: Yes, absolutely. That’s what I believe to be true in most cases. It can really help you out. As long as you do it the right way, and you’re responsible as you move forward, it can definitely give you a fresh start. That’s the whole idea.

By Court Koehler

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