Bankruptcy effects on credit scores

What is the number one question most people ask when discussing bankruptcy with an attorney?

What will filing for bankruptcy do to my credit?

Most of my clients are under the mistaken belief that filing for bankruptcy permanently destroys their credit and that they can never qualify for a mortgage, refinance a home loan or buy another vehicle on credit.

Myth vs. Reality:

Well, the reality is that those who choose to file bankruptcy rather than struggle for years attempting to pay off their debts end up with a better credit score than those who take years to try and pay off their debt. Yes, your credit score takes a big hit at the beginning. However, with some work your score can quickly climb.

The key is to reestablish your credit and show you can manage paying your bills responsibly. You can do this by paying your rent and utility bills timely, or by obtaining a secured credit card. By routinely using the credit card and paying the card on time, you can improve your credit rating faster.

By taking the initial hit on your score rather than having slow pay or no pay trade lines on your report for years, you can take steps to raise your credit score within a few years.

The Solution:

So, how do I answer the question, “What will this do to my credit?” I tell my clients, I don’t have a crystal ball and cannot see into the future. However, I do know that getting out of debt is the first step to financial freedom.

If you cannot dig out of the credit score pit you will never qualify for a better interest rate on a home or car. You are destined for a lifetime of subprime loans and heavier debt burdens. Let Ebert Law Offices help you lift the burden. There is hope for the future.

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