The first thing I have to say is watch out for the bankruptcy myths out there, particularly the total lie that you will have bad credit for 10 years. This is flat out false. The truth is that Bankruptcy will not prevent you from getting a really good credit score (even above 700) in less than two years after your discharge. Some clients even get it within 12 months! Can you pay off your debs and get even a 600 credit score in the next 12 months without bankruptcy? Probably not Without bankruptcy, one or two or even five years from now you will be struggling along with your debt, missing payments and your credit will be terrible.
Yeah, but please explain, how do I get better credit faster than if I don’t file bankruptcy?
For most people who need bankruptcy, filing bankruptcy does not ruin their credit for long (if at all). After filing bankruptcy you will have the opportunity to get good credit pretty quickly. You have to compare that to how long it would take you to restore good credit without bankruptcy.
Remember, the comparison is not:
‘your imaginary perfect credit score’vs. ‘bankruptcy credit score’
The comparison is:
‘your CURRENT or PROBABLE credit score’ vs. ‘the post-bankruptcy credit score’
If you are reading this your credit is probably already almost as bad as with bankruptcy, or it soon will be. Bankruptcy will likely have almost no impact on your credit score if you have judgments and old unpaid debts.
Without bankruptcy you have to:
- a.repay all your debts (no more late payments)
- a.settle all your debts (usually impossible because for it to work you have to instantly come up with big lump sums, and this is just about as bad for your credit as bankruptcy anyway)
- a.do nothing and keep struggling along.
The first solution of repaying your debts is not going to work. Otherwise you would not be reading this. Even if it does eventually work, it would take much longer than filing bankruptcy and rebuilding your credit after that. Also, you would be suffering during the repayment, possibly neglecting health care, nutritional and other basic needs.
The second solution of settling your debts is almost always a disaster. The only debt settlements that are helpful to credit are ones where you have access to a lot of cash upfront (usually borrowed or given by a family member. This is usually a terrible idea for many reasons. Also, the debt settlement and debt negotiations firms often set people up for disaster and only delay the bankruptcy. Click here to learn why debt-settlement and negotiation can be the worst of all options.
The third option is no solution at all. Bankruptcy will instantly eliminate your debt and get you a fresh start to recovering good credit.
Credit Scores Are Complex
Of course whether you get good credit depends on your earning pattern, your spending pattern and how good you are at paying bills on time. However, bankruptcy will not keep your score done low enough or long enough to wreck your future.
Credit scores are complex. The credit bureaus keep them complex so that people can not ‘trick’ the system and get good credit scores that they don’t deserve. Still, there are some fundamental things we know go into a credit score.
- Debt to income ratio (how much debt do you have relative to your income?)
- Outstanding debt
- Payment history
Debt to income ration and amount of outstanding debt are instantly improved with bankruptcy. Payment history might appear worse, but as I said before, if you are reading this, your payment history is shot anyway.
This is the untold truth. Bankruptcy has almost no negative impact and usually has a positive impact on peoples credit scored if you look at a longer term picture (at least one to two years).
Special Note From Attorney David Waltzer.
Thank you for visiting my site. There is so much confusing information out there, particularly about this issue. I want to remind the reader that when it is best for our client, my firm does EVERY KIND OF DEBT SOLUTION (debt negotiation, debt advisement, etc). Like everyone else in the industry, we make more money with a debt-negotiation or debt-settlement case than with a bankruptcy case. The difference is that we don’t advise our clients to do what makes us the most money. We advise our clients to do what is BEST FOR THE CLIENTS. The truth is that if you qualify, bankruptcy is usually better for your bank account, better for your credit score, better for your family, and better for your life. Don’t believe the ‘scare-tactics’ out there.