Debunking The Myth That Bankruptcy Ruins Your Credit

If you google “is bankruptcy bad on my credit” you are probably going to get an answer that says “yes.” If you ask friends or family who have never filed bankruptcy before, you’re probably going to get a reply that says something like “don’t file bankruptcy, it will ruin you for 10 years.”

My first piece of advice is, don’t listen to anyone that’s never done it themselves. Secondly, don’t believe everything you read on the internet (unless I’m writing it, of course).

Google and your random acquaintances never seem to consider an obvious factor. For the vast majority of my clients, by the time they get around to contacting me for the first time, they are already behind on most or all of their bills. So, here is the news flash: THEY ALREADY HAVE BAD CREDIT!

Sure, if you have an 800-credit score and file a bankruptcy then, yes, your credit score is most certainly going to take a hit. On the other hand, if you, like most of my clients, have a 500 credit score (or worse), then you don’t really have anywhere to go but up.

After all, the reason you are contacting me in the first place is because you simply can’t pay all your bills. Maybe it was a loss of income, a health problem, divorce, or just the fact that life is hard, but something has caused you to fall behind. And, as we all know, if you are behind and can’t catch up, then your credit score is going to tank whether you file bankruptcy or not.

So, these other people and your internet research are looking at the problem all wrong. The question we should be asking is not “will bankruptcy hurt my credit?” The correct question is: “how can I fix my bad credit in the fastest and least expensive way?” The answer to that question is often bankruptcy.

I tell my clients that the best way to think about bankruptcy is: where will I be a year from now, two years from now, etc.? If you can’t catch up your bills on your own, then you will be in the same or worse position. On the other hand, if you go ahead and bite the bullet and file bankruptcy now, you can start putting it all behind you. Then a year from now, it is very likely that your credit score will be better than where you started. Within two or three years, your credit score might even be pretty good again. The reason is because bankruptcy eliminates all those creditors that are reporting negatively. Credit cards, loans and medical bills are all gone. Collection items like repossessions, old phone bills, broken leases – all gone. It’s all zeroed out. We’ll bring you current on your house payments, stop foreclosures, and stop repossessions. All these things together allow your credit score to begin moving in the right direction so, within a year or two, you are already seeing improvement. In fact, most mortgage lenders will tell you that they can approve a mortgage within one to three years after bankruptcy and, if you can get a mortgage, then you can get just about anything.

I can’t tell you how often I have a client say to me “I wish I had done this a long time ago.” It’s natural that you may want to avoid or put off bankruptcy. I would even agree that bankruptcy should usually be a last resort and not a first resort. However, if you have reached the point where you are falling farther behind, spinning your wheels, making no progress, no light at the end of the tunnel – well, that’s when it’s time to call me.

Let’s change the narrative and start getting the word out that bankruptcy is more likely to help your credit than hurt your credit. And, if you feel like you are overwhelmed and can’t see that light at the end of the tunnel, reach out to me online now!