If you feel like you are living under mountains of debt, you know how stressful your financial situation can be. After all, not having enough money to pay your bills can lead to countless sleepless nights. Fortunately, a bankruptcy filing may allow you to address your outstanding balances proactively.

There should be more to life than the constant struggle for financial freedom. If you have medical bills, credit card balances, a mortgage, a car loan or other types of debt, filing for bankruptcy may give you a fresh start. Still, bankruptcy can cause your credit score to plummet initially. You may not realize, though, that a filing may eventually improve your creditworthiness.

Delinquent debts 

If you have a significant amount of debt, you may have made late payments or stopped paying altogether. Delinquent debts usually harm your credit score, as they indicate a history of an inability to pay. When you file for bankruptcy, though, your credit report no longer lists delinquent accounts. Instead, it considers them discharged or otherwise addressed in bankruptcy. 

Debt-to-income ratio 

Many lenders consider an individual’s debt-to-income ratio when deciding whether to extend credit. If you have substantial debt compared to your income, you may not be able to secure a mortgage or auto loan. You may also have difficulty obtaining other types of financing. Because a bankruptcy filing discharges some debts, your debt-to-income ratio may decrease. 

Future success 

Everyone deserves a second chance. Bankruptcy allows you to build a strong foundation for future financial success. That is, after addressing your debts, you can allocate income to paying other bills. Eventually, your credit score is apt to begin to climb.

Bankruptcy affects everyone’s creditworthiness a bit differently. Still, you should not let your credit score dissuade you from making smart financial decisions. If you have too much debt, a bankruptcy filing may be the right way to get your credit back on track.