How Filing Bankruptcy Can Be the First Step to Rebuilding Your Credit
- Author Norma Duenas
- Published July 4, 2011
- Word count 570
The decision to file bankruptcy is not one that comes easily for most people despite the vital role it can play in providing those saddled with overwhelming debt a lifeline to rebuild their financial lives. Many people are still influenced by outdated stereotypes that view bankruptcy protection as some sort of immoral act. Others believe that bankruptcy is a fatal blow to one’s credit and makes the prospects of being a homeowner or establishing credit in the future virtually impossible. These outdated myths often prevent those who need bankruptcy relief from doing the one thing that can have the most positive long-term influence on their credit – filing bankruptcy. Confused? Yes, I said that bankruptcy could be an important step in rebuilding your credit.
There are those who labor under a mountain of debt for years struggling to make "interest only" payments as principle piles up as they slowly sink deeper and deeper into debt. As adverse creditor actions become more and more oppressive, these individuals slowly sink like a person hopelessly thrashing about in quicksand. Sometimes this merely delays the decision to file bankruptcy, which is virtually inevitable given one’s debt load and income. As a family sinks deeper into debt, their credit continues to get worse, and they struggle financially but make only minimal or no progress in obtaining either relief from debt so that they can improve their lifestyle or toward starting over.
This is where bankruptcy can be a key factor in both rebuilding one’s financial life and even improving one’s credit. Certainly, either a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy will have an adverse impact on a debtor’s credit in the short-term. However, a bankruptcy discharge is like a branch extended to the debtor sinking in quicksand. Whether you file a Chapter 7 or Chapter 13 Bankruptcy, you will receive a discharge so that you start over with most or all of your financial obligations being eliminated. There are exceptions as some debts may not be subject to discharge or be more difficult to discharge including student loans and taxes or secured debts where you choose to keep the collateral (i.e. family home or vehicle).
The point is that when you emerge from bankruptcy, you will have very little or no debt, and income to debt ratio is an important factor in one’s credit rating. Further, the fact that all (or most) prior financial obligations have been extinguished by the bankruptcy discharge means that those debts should not be considered by future creditors. Sometimes creditors whose debts have been discharged have no incentive to remove these debts from your credit report so it is a good idea to write to the three credit bureaus and challenge any discharged debts.
The bottom line is that a person who has discharged their debts in bankruptcy and has little or no debt generally is considered a safer credit risk then the person sinking in quicksand of overwhelming debt who has a truckload of write-offs and collection accounts. A creditor knows that once a person obtains a bankruptcy discharge, the debtor must wait a substantial period of time before the debtor can again obtain bankruptcy relief. If you slowly and gradually begin to rebuild your credit following a bankruptcy you can actually put your credit back on course more quickly by filing for bankruptcy rather than delaying the inevitable while drowning in a sea of debt.
Norma Duenas is a California Bankruptcy Attorney who represents clients in Chapter 7 and Chapter 13 bankruptcy cases. For more information you can go to Riverside Attorney or call 951-241-8070 for a free consultation.
Article source: https://articlebiz.comRate article
Article comments
There are no posted comments.
Related articles
- Effective Strategies for Paying Off Your Mortgage Faster
- How Does Equity Release Work?
- Florida First Time Homebuyer: The Indispensable Guide of Tips, Programs, and Resources
- How to Become Debit Free?
- Sellers Concession the Closing Cost Option
- Financing Short Term rentals with DSCR loans
- Why move to Roseville CA
- Simple Interest Mortgage Advantage
- Are Low Doc Commercial Loans available in Australia
- How to Obtain a Rural Agriculture Loan Quickly and Easily
- What is a Caveat Loan?
- Tips for improving your Credit Score before getting a Home Loan
- 3 Things To Look out for With An Equity Release Mortgage
- Manage your Debts by Refinancing your Current Home Loan
- How to Get a Home Loan with Unusual Employment or Income?
- 20 Effective Debt Consolidation Loans Tips with Bad Credit
- Tips for Choosing a Non Conforming Lender
- Why is a Good Credit Rating Important in Australia?
- Most Common Ways That People Fall Into Personal Bankruptcy
- How to Choose a Consumer Credit Counseling Agency?
- Consolidate Your Debts and Take Control of Your Finances
- How to get a Home Loan due to a Bad Credit Report
- Debt Consolidation Home Loans are a Solution to Multiple Debt Problems
- Facts You Should Know About Low Doc Home Loans in Australia
- No Doc Loans from Private Lenders
- Home Loans to Consolidate Debt for People with Bad Credit
- How Can I Get a Mortgage If I Have a Bad Credit History?
- Guidelines to Fix Bad Credit Effectively Through Dispute
- Dealing with Debt – What to know about Debt Consolidation
- Investing In Yourself Before Investing in the Market