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Will Filing for Bankruptcy Ruin My Future?

We have all been told that bankruptcy should be avoided at all costs because of the damage it does to your credit. But is this true, or is bankruptcy a viable means of dealing with your consumer debt?

The good news is that your future is definitely not ruined by personal bankruptcy, provided you go about it the right way and get the proper help.

How Can Bankruptcy Negatively Impact My Future?

The biggest impacts that bankruptcy has are the impact on your credit score and your ability to secure credit in the future.

The impacts vary depending on several factors:

  • Impact on your credit score: Your credit score is what lenders use to decide how much credit to extend to you and at what interest rate. The higher your score, the better rates and total amounts of credit are extended to you, in general. Unless you are way behind in payments and already have a low score, bankruptcy can lower your score dramatically.
  • Impact on your ability to get credit: A bankruptcy generally stays on your credit reports for seven years. Most lenders, when they see a bankruptcy on a report, are understandably reluctant to lend to you because their investment is less likely to be repaid. This can make getting car loans or securing housing very difficult, especially for the time the bankruptcy appears on your report. Also, it can take time to rebuild your credit after bankruptcy, earning the trust and reputation you grow when you are building your credit initially.

Other ways bankruptcy can impact your future:

  • Loss of property and assets: If you are self-employed or own many assets, bankruptcy can strip you of some of those things, making it harder to get them back.
  • Fraud risk: If you file yourself, you may unintentionally be putting yourself at risk for committing fraud during the disclosure process. The rules for bankruptcy are quite complicated, and failing to adhere to them can prove costly in numerous ways, including a fraud conviction.

So How Do I Protect My Future and Get Debt Relief?

If you need to eliminate large amounts of debt and you have the time to rebuild your credit, seeking help with filing for bankruptcy is still a viable option. Done properly, it can give you a new beginning and a clean slate to rectify the problems of the past. If you have a good trustee, you may be able to keep most of your assets if they are not deemed to have significant worth. The bankruptcy freezes your vulnerability to wage garnishment and collections procedures and can free you from the collections process altogether if done right.

The bottom line is if you cannot make payments on time and are already involved with the collections process, professional help in filing for bankruptcy can improve your chances of having a sound financial future rather than hurt them. The key is finding experienced help to guide you through the process and sticking with the plan.