Many individuals who are struggling to repay their debts are tempted to file for bankruptcy. Almost as many hesitate to take advantage of this opportunity because they are concerned about what this course of action will do to their credit history and their credit score.
If you are thinking about filing for bankruptcy, it’s important to understand what filing for bankruptcy will and won’t do to your credit. In a nutshell, filing for bankruptcy relief will temporarily damage your credit but could improve its eventual outlook tremendously.
Short-term disadvantages, potential long-term gains
If you choose to file for bankruptcy, your credit score will be negatively affected for a few years. However, the impact of this negative hit on your score will lessen over time. If you make responsible financial choices after your bankruptcy case has been resolved, future creditors may even view your bankruptcy filing as an indicator of financial responsibility.
How is this possible? The government offers bankruptcy relief because it recognizes that even responsible, hard-working individuals and married couples may fall on hard times and that all people deserve better than a “forever struggle” with debts they can’t repay. Filing for bankruptcy allows creditors to see that you are committed to dealing with your debts and that you’re not running away from them. So, not only does a bankruptcy filing itself impact one’s credit history less and less as time rolls on, it can be utilized as a catalyst for a strong, stable credit history moving forward.
Carefully considering both the short-term and long-term impacts of bankruptcy – credit consequences are just a small piece of the broader puzzle – will help you to make smart choices about your debt management and debt relief options. But if the myth that bankruptcy will wreck your credit forever is all that is holding you back, you now have information that will allow you to move forward confidently in whatever direction you choose.