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Bankruptcy and your credit score

People often put off filing bankruptcy because of the fear of what it will do to their credit score. However, your bankruptcy and credit score are tied together in ways most of us don’t consider. We have been taught that a high credit score is a requirement for a happy life. In fact, it is not. You can be perfectly happy and make healthy financial decisions with a low or recovering credit score. But you can’t do it if you’re overwhelmed with debt. A bankruptcy fixes that. And, your credit score WILL recover– faster than you think.

When Will My Credit Score Recover?

Your bankruptcy and credit score go hand in hand. Bankruptcy will remain on your credit report for a number of years. However, most clients report that one year after filing bankruptcy their credit score is better than it was before filing. The reason is that when you file bankruptcy, your debt to income ratio improves. Your income hasn’t gone up, but your debt has gone way down. In the eyes of creditors, you’re actually a GREAT candidate for credit– you have no other debt, and they know you can’t file bankruptcy again. All this means you are likely to make your monthly payments on credit card debt.

Having a bankruptcy on your credit report will take you out of the home purchase market for a few years, it’s true. However, most clients start getting credit card offers a month after they file bankruptcy. My hope is my clients have a new clarity around managing their money and make smart decisions about credit after filing bankruptcy. Here are a few thoughts to consider.

I Need To Own A Home, Right?

There are millions of Americans who don’t own their home. This has always been true. It doesn’t mean you’re not spending your money wisely. If you are renting you are missing out on interest deductions on taxes and on appreciation on the value of the home over time. One look at today’s market will tell you that experts are unsure as to whether prices will continue to drop. In fact, if you bought a home three years ago, you’ve most likely lost money on it.

There Are Other Ways To Invest

If you’re concerned about missing out on the appreciation that comes with home ownership, don’t be. Keep in mind you can set aside the same amount of money each month into an IRA or other investment vehicle—stocks, bonds, etc. Even when recovering from bankruptcy, you can be responsibly planning for the financial future. Filing bankruptcy and your credit score won’t keep you from doing this.

Consider Your Needs Today

A choice to file bankruptcy is both a long-term plan for financial stability and a short-term plan. While there are costs associated with credit extensions, the bigger picture is that you will reap the immediate reward of financial freedom. You will once again have disposable income. That is the foundation for building wealth. If you manage that disposable income wisely—by investing it and saving it rather than spending it on monthly credit card bills—you will start to accumulate wealth. And you do it under peaceful financial conditions. Less stress and more clarity.

Make a Call

Make a quick phone call today to talk to me about bankruptcy. I am genuinely excited to help people see the path before them and quickly achieve financial freedom from financial stress. You deserve the quality of life that comes with it.

Email me at chris@thelaytonlawfirm.com or call 704.749.7747 today for a free consultation about bankruptcy and an honest discussion about your best options. Or, click for a FREE CASE EVALUATION.