I probably get asked this question at least ten times a day – really any time I meet with anyone to talk about bankruptcy. Won’t filing bankruptcy ruin my credit score? My general answers to this inquiry:
First – why do you care about your credit score?
A credit score is mostly useful for…getting credit, which is often part of the problem when considering bankruptcy. Granted, there are situations where a credit score is used to determine deposits or a credit report is run for a job because you are handling money, but this being stuck on credit scores thing is exactly what the card issuers want. They want you to apply for their cards, keep a balance, and pay them lots of interest. There’s also another myth out there that you can’t buy a house for 10 years after filing bankruptcy – don’t even get me started on that one (but I will do a follow-up blog post on that topic).
Second – Is your credit score all that great now that you have not been making credit card or mortgage payments for the last 12 months?
Most of the people considering bankruptcy already have a fairly low credit score. Bankruptcy is not going to make it lower. In fact, that fresh start often increases your credit score. The reason for this is that you are a better risk without all of that debt hanging over your head. Not that I’m advocating going out and applying for new credit cards, but bankruptcy isn’t a financial death sentence.
Third – Are you ready to plan for the future?
I always tell clients that I never want to see repeat business in my line of work. Part of the bankruptcy process should involve setting up your future with savings and retirement accounts. Many credit problems can be solved by having a good-sized downpayment available for large purchases, like houses and cars. When you file for bankruptcy, you have the possibility to grab that fresh start and create a great future for yourself by understanding your budget and being honest about what you can afford.
This is just a basic overview and is not legal advice specific to your situation. If you are considering bankruptcy or are feeling overwhelmed by debt, you should speak with an attorney in your area for legal advice. To speak with me regarding your situation, please email me at firstname.lastname@example.org or call 925-586-6738 in the East Bay or 209-322-4651 in Tracy.