If you are having bad credit scores and you are unable to pay off your creditors, bankruptcy can be a good option.
Credit Score
Credit score is the numerical value of your credit worthiness. If you have a high credit score it indicates that your credit worthiness is high and lenders will be ready to offer you credit on favorable terms. Likewise if your credit score is low, it indicates law credit worthiness and lenders will be less willingly to offer you credit.
Bankruptcy
Bankruptcy is a legal process regulated by federal law and enables debtors to discharge their debts. Most debts will be discharged by bankruptcy. Bankruptcy can have a negative impact on your credit. It will remain on your credit for 10 years from the date of filing of your bankruptcy petition. It will reduce your credit score by anywhere between 160 to 200 FICO points.
So if before filing for bankruptcy your credit score was 550 FICO points, post bankruptcy your credit score will range between 330 to 390 FICO points. Although bankruptcy will remain on your credit for 10 years and know 160 to 220 FICO points of your credit score, there is a silver lining. First of all the credit bureaus will compare you with people of similar financial circumstances. So you will be compared with other bankruptcy filers and not with people with excellent or good credit. Your credit score will be determined in comparison with other bankruptcy filers. Another point you need to understand is that most people by the time they decide to file for bankruptcy have a bad or low credit score and it cannot get any worse. In fact some bankruptcy filers come out of bankruptcy with a better credit.
How Lender’s Will View You
Just because you have been through bankruptcy, it does not mean that lenders will avoid you. There are many lenders who specialize in providing credit to those who have just come out of bankruptcy. In your credit report the outstanding of all the debts that have been discharged by bankruptcy will be shown as zero. Most of your debts will be discharged by bankruptcy. So your future income will be free from creditors and will be available for repayment to the lender.
Get Legal Help
If you have having low credit scores and you are unable to pay off your debts, consult with an experienced bankruptcy attorney. The attorney can review your case and let you know if bankruptcy filing is a good option.
