One of the most common myths about filing for bankruptcy is that it will permanently destroy the credit scores of filers. Fortunately, this myth has no basis in reality.
As we have suggested on our blog before, there is no such thing as a ‘permanent credit score’. Not only that, but if you are filing for bankruptcy, a low credit score should be the least of your worries. Should a person facing the prospect of foreclosure on his or her home be excessively worried about a low credit score? The answer should be ‘no’. If you are contemplating bankruptcy, here are some facts you should consider before worrying about your credit score.
Credit scores can be repaired: Repairing a credit score may not take very long after filing for bankruptcy. Depending on your situation, discharging excessive amounts of debt might allow you to improve your credit score faster than if you had not filed. Why is this the case? If you have hit a point where debts are unpayable and you are experiencing frequent late payments, it would be more damaging to your credit score to not file for bankruptcy.
If you are experiencing wage garnishments of up to 25 percent of your income, chances are you have also fallen behind on other debt obligations (that are likely damaging your credit score). Discharging or reorganizing unaffordable debts could free up income that could be spent repairing your credit score.
Keep in mind, that credit scores improve with stability. Regular utilities, rent and other payments can improve scores. In addition, career stability may also improve credit ratings.
There are more important problems to worry about: There are worse consequences caused by excessive debt than low credit scores (foreclosure, wage garnishments). If you are facing a situation where you could lose your home or debts have become unpayable, your credit score should be the last aspect of your finances causing worry.
Filing for bankruptcy could save your home and other important assets. Keep in mind, that after filing for bankruptcy, an automatic stay is issued on debts, meaning all collection attempts temporarily come to a halt (including foreclosure and wage garnishments).
Why Bankruptcy Myths Are Harmful to Debtors
We bring these points up because one of the most common concerns people have when deciding whether to file for bankruptcy is ‘will my credit be tarnished forever?’. This myth is actually quite harmful, as filing for bankruptcy might be the best solution for struggling borrowers.
The Kansas City bankruptcy attorneys at The Sader Law Firm can help debtors resolve their financial problems.