Bankruptcy Credit Impact
Bankruptcy credit impact is a consideration when considering filing for bankruptcy. But it is not always a negative one. Why? Filing bankruptcy negatively impacts your credit. But so does debt. When your debt begins to overrun your income, something needs to be done. Sure, you can increase your income, but that is easier said than done. This is particularly so for people on fixed incomes. Fixed incomes are no longer exclusive elements of the elderly. Anyone earning a salary is on a fixed income. The amount they make is the amount they make. Little or nothing can be done to alter that financial arrangement.
Debt, on the other hand, can be changed. Through bankruptcy, debt can be eliminated. That is why the bankruptcy credit impact is not as damning as is often imagined. By eliminating debt through bankruptcy, a filer’s debt-to-income ratio can be instantly restored.
Often people file bankruptcy to improve their credit, as this USA Today article reflects. When consumers are turned down for loans due to their detrimental debt-to-income ratio, but their income is set in stone, their debt can be dealt with through bankruptcy. It is a common scenario prompting people to file for bankruptcy. It shows there is a positive bankruptcy credit impact. And for good reason. Bankruptcy works.
Over the more than 20 years I have practiced bankruptcy law, some of the most commonplace referrals are from friends and families of those whose bankruptcy credit impact benefitted their ability to get a loan. Bankruptcy is not for everyone. But if your debt is holding you back from loans you want or need, bankruptcy may be the best solution. The evaluation whether bankruptcy is best is a cost-benefit analysis. Is it better to have debt and no bankruptcy? Or is it better to have no debt and a bankruptcy? That is the question. What’s right for you, then, depends on you.