You may have been dealing with your debts for quite some time. You are tired of hearing creditors calling your phone demanding their money be paid. You may be trying to decide what is best for you, your family and financial future. The possibility of filing for bankruptcy may be your last resort. It is true that with any major life-changing decision you must make, there are pros and cons. You must decide which is best for you. But you may be wondering, will filing for bankruptcy really ruin my credit?
The truth about bankruptcy
Bankruptcy has both pros and cons to filing. Some include:
- Your credit score will drastically decrease and can drop over 200 points.
- Bankruptcy can ruin your credit for a long time. For Chapter 7 bankruptcy it can stay on your report for 10 years. However, having your bills not being paid can result in lawsuits and hurt your credit, possibly even more than bankruptcy.
- You may lose all your credit cards. The interest rate may be higher, but you should be able to get new credit in one to three years.
- You will still have to pay for your student loans. However, bankruptcy will stop your lenders from pursuing you which means they can no longer harass you.
- You may have to continue to pay for any child support or alimony. Only a family court judge can change those requirements. But bankruptcy will take care of your other fiscal responsibilities.
- You may lose some property and extravagant belongings. It depends on what state you live in. But there are exceptions for you to keep some property you may need. You also get to keep your job and income. If you live in Texas the law would allow you to possibly keep your home and car.
- If you don’t already have one, it may be challenging for you to get a mortgage. However, although you might be considered as a major risk, some lenders are willing to take that chance.
If you are still on the fence about whether to file for bankruptcy, you may be able to negotiate your debt. For instance, hospitals and credit card companies are aware that they will not get paid if you file for bankruptcy. So, they may be willing to settle the account for less than the full amount you owe. It may be available as an option after you have not paid your bills for several months.