If you’re thinking about filing for bankruptcy, you may – very understandably – be concerned about what making this effort will do to your credit. The challenging news is that filing for bankruptcy will temporarily result in negative effects on your credit score and will be noted in your credit reports. The great news is that – if you approach the aftermath of your bankruptcy filing in a specific way – taking this step may ultimately do more good for your credit down the line than failing to resolve your outstanding debts would.
Temporary vs. Long-Term Pros and Cons
As an experienced bankruptcy lawyer – including those who practice at Therman Law Offices, LTD. – can confirm, filing for bankruptcy can provide individuals, families, and even businesses with a fresh financial start. Therefore, the pros of filing for bankruptcy often outweigh the cons when someone is struggling with a number of outstanding debts.
With that said, the hit that bankruptcy takes on an individual’s credit shouldn’t be dismissed casually. Having a good credit score can help you to secure housing, financing, and even employment. If your credit score takes a significant dip, you may find it more difficult to secure these opportunities.
And yet, if you’re thinking about filing for bankruptcy, chances are that your credit score is already relatively low as it is. If your credit score is stellar and you’re only struggling with one or two debts, filing for bankruptcy may not be worth credit-related consequences. But, if your credit score is already low, you may have very little to lose and a great deal to gain.
Bankruptcy as a… Responsible Choice?
If you are a responsible debtor and repay your obligations on time after filing for bankruptcy, potential lenders, property managers, and employers will likely come to view your decision to file bankruptcy in an increasingly positive light over time. Why?
First, your credit score will begin to bounce back – slowly at first – in the months after you file for bankruptcy. Therefore, the significant impact that bankruptcy will have on your credit initially will lessen naturally over time. Those who pull credit information are primarily interested in how you’ve been handling your recent finances. Once your bankruptcy filing is months – and then years – old, it will impact any decision-making on a lesser and lesser scale.
Second, filing for bankruptcy indicates that you’re willing to address your financial challenges head-on. Instead of hiding from your obligations or simply refusing to deal with them, you will have taken responsibility to resolve them to the best of your ability. As a result, the very act of filing for bankruptcy can be beneficial over time, provided that you engage in responsible financial habits moving forward.
Finally, if you don’t get out from underneath the crushing weight of your current debts, you’ll likely keep incurring interest charges, late fees, etc. and your credit score may continue to drop due to this reality. You can halt this issue in its tracks by seeking bankruptcy relief.