Bad credit scores can harm anyone who is looking for a new loan or credit card. However, filing bankruptcy will further hurt a credit score, though it may be the best route for many people in the long run. Bankruptcy clears the slate. It helps the individual to have most types of unsecured debt discharged. This new financial clean slate takes time to improve.
Holding On To Debt
Many people have to weigh the good and bad aspects of filing bankruptcy. Bankruptcy does stay on a public record for up to ten years. During that time, applying for new loans, credit cards, insurance plans, and in some cases, employment, can be more difficult, and in some cases impossible. Buying a home, refinancing a mortgage and purchasing a car can be more costly, especially right after bankruptcy. So, why do it?
Individuals who are unable to pay down debt are unlikely to be able to get out of debt within ten years. In many cases, paying only the minimum payment each month leads to years, if not decades, of repayment. In fact, by the time these loans are paid off with that minimum monthly payment, it is likely that the bankruptcy discharge will be removed from a debtor’s credit report.
Once the bankruptcy discharge occurs, individuals do need to take steps to improve credit scores. Even bad credit scores can be improved over a period of time by making smart financial decisions, such as:
- Make payments on time for all loans, utilities and other debts.
- Keep balances on all accounts as low as possible.
- After a period of time, usually between six months and a year, credit card companies may offer secured or low credit limit lines of credit. Accept one or two, use them infrequently and pay off the balance in full each month.
- Avoid missing payments on secured loans, including car loans and mortgages.
- Work to remove any negative credit marks on credit reports. Most negative marks, such as late payments, should be removed within seven years. Bankruptcy remain for ten years.
In many situations, bankruptcy is the best opportunity for an individual who has bad credit scores to work to improve them. It takes time and hard work to accomplish this.
Hiring an Attorney
For those who are unsure of whether or not they should file bankruptcy, an attorney can help. In many instances, the attorney will work closely with the individual to determine his or her need to file and then handle the legal work on their behalf.
