One of the biggest reasons people are reluctant to file for bankruptcy is the fear that it will damage their credit for 10 years. While it is true that a bankruptcy will stay on your credit report for 10 years, that in no way means your credit will remain terrible for that length of time. Nothing could be further from the truth. In fact, if you manage your debt and bills after bankruptcy you will find your credit rebound quicker than you
ever thought possible. You can be back into the high 600s or low 700s within two to three years after filing. For example, you may be able to qualify for an FHA home loan in only 30 months after filing.
This is a critical fact and changes the decision making process entirely. Once you realize you can get back on your feet in two to three years, I ask all of my clients to ask themselves the following litmus test question: Can I pay back all of my current debts within three years, still live like normal person and take care of my family as I want to?
If the answer is no, which it usually is, then bankruptcy is probably the smart strategy to employ. A simple example illustrates the point. If you have $30,000 of debt accruing interest at 12% annually, you would have to pay approximately $1,162 per month to pay it off within 30 months. If this is not feasible, there is no real reason to part with that amount of money. Your credit position in 30 months will be comparable whether you file bankruptcy or not. And by filing, you would have improved your cash position by over $60,000. The $30,000 you would have paid to creditors can be spent on your family, or perhaps enabling you to save enough money for a down payment on a home under the FHA program. When you realize that bankruptcy is not the end of world and you can get back on your feet quicker than you think, it’s becomes clearer and clearer that bankruptcy is the smart strategy. For so many people, it’s a no brainer.
Mr. Taggart is a 1997 graduate of The Ohio State University and is one of the only bankruptcy attorneys in Colorado with an Masters in Business Administration with a focus in Finance. He earned his MBA from The Ohio State University in 1997 and is a cum laude with B.A. in economics from Kenyon College. Mr. Taggart focuses on bankruptcy law and has helped hundreds of people in Chapter 7 and 13s across the state.
For a free consultation call 303-753-9701 or contact him online.