When it comes to financial topics, there is one that tends to be a bit controversial, meaning it has a negative stigma attached and therefore leads people to think it is a bad thing. That topic is bankruptcy. The truth of the matter is that there are several types of bankruptcy, and if you are facing a serious financial crisis, one of those types may be a viable option, not only to help you obtain debt relief but to lay the groundwork for a stronger financial future as well.
So, how do you know? How can you tell if bankruptcy would totally ruin your credit score (as you might have heard it would) or if, instead, it might actually be a first logical step to take to get your head back above water and move toward restored financial stability? The answer lies in learning as much as you can about the various types of bankruptcy and also in knowing where to seek support from someone well-versed in bankruptcy laws and facts.
The credit report issue
It is true that, if you file for bankruptcy, it shows up on your credit report. Depending on which type you file, typically Chapter 7 or Chapter 13, this determines how long it will stay on your report. However, it is not necessarily true that having bankruptcy show on your credit report ruins your credit score.
In fact, in many instances, it causes your score to rise; that’s because, through bankruptcy, you will discharge debt, and said debt will no longer be a detriment to your credit rating, thereby enabling you to increase your credit score.
Have you been feeling harassed by collections phone calls? If so, then that may be another reason for you to consider filing for bankruptcy. When you file for this type of debt relief, it activates an automatic stay against creditor collections; it also prevents anyone from filing a lawsuit against you.
Many people have been able to save their homes by filing for bankruptcy as well, because it often stops the foreclosure process in its tracks.
An opportunity to wipe the slate clean
Regardless of what exactly caused your financial crisis, whether it was unexpected medical bills, decrease in income, loss of a job or spending habits gone haywire, you needn’t feel hopeless or helpless about finding a strong solution.
Filing for bankruptcy allows you to discharge many debts, such as those associated with credit card balances, utility bills and personal loans. Sometimes, all that you need to gain a stronger footing on solid financial ground is to start afresh, and bankruptcy often helps people do that.