One of the most common concerns for people considering bankruptcy is the impact it will have on their credit. This is understandable but this concern is generally rooted in the huge misperception that bankruptcy will ruin your credit for 10 years. This simply is not true. Your credit score is a component of many factors and, if you follow some basic tips that are available from a credit rehabilitation colleague of mine, you can often can back to the 700s within two years. www.united-credit.org
Another reason that concern over your credit score is often misplaced is because, because by the time you consult a bankruptcy attorney, your credit is probably already damaged or you are already tapped out and don’t even want any more credit anyway. Sure, bankruptcy damages your credit but the relative damage is not that huge if your credit is already hurt or don’t want or need any more. This is especially true if have had a foreclosure precede your bankruptcy.
Not only do people tend to overly focus on their credit, they fail to realize the money saving potential filing bankruptcy can unleash. Believe it or not, bankruptcy can enable you to save thousands for retirement, school or whatever else you need. Read on.
Consider the following scenario I have seen time and time again. A couple in their late forties has, say, $30,000 in credit card debt and has struggled to keep payments current. They barely can make a dent in the principal but their credit score is still decent. They have a mortgage on their home which is about equivalent to the value of the home (i.e. no equity). They can continue to make credit card payments of, say, $500 per month but by the time they are done, they will be approaching retirement age.
They are fighting the good fight but not the smart fight. If they were to declare BK, sure, their credit would be hit but I would say, isn’t that worth the price? Now, instead of paying out $500 each month, they can save that $500 toward their retirement or make an extra payment on their home to build equity. Is maintaining a decent score, worth it at the expense of saving thousands for your retirement when you are in your forties? And if you have a house, you already have the most important thing good credit is designed to accomplish…a house.
And what if you don’t have a house but want a house in the future? Wouldn’t bankruptcy kill your chances to secure financing? No…you can qualify for mortgage in two to three years. And more importantly, now that you have eliminated the debt, you now have the ability to save for the critical down payment. The days of zero down payments are over and so if you have great credit but no down payment, it will not matter much.
I often tell people in all seriousness that good credit is important but… cash is king. By filing, BK you can literally enable yourself to save thousands upon thousands of dollars. And never forget, you can recover quicker than you probably thought.