Many people feel responsible for meeting their financial obligations and view bankruptcy as a necessary evil, and only as a last option. However, most people who accrue overwhelming debts do so through no fault of their own.
Massive medical debt is responsible for nearly two-thirds of all bankruptcy filings. While creditors and credit bureaus often say bankruptcy harms your credit score, filing isn’t the end of the world, and frequently it’s the best action you can take.
The credit score argument
While creditors often say bankruptcy is the worst thing you can do for your credit score, the truth is that foreclosures, collections, repossessions and repeatedly missing payments can drive down your score just as fast.
A recent study by the Federal Reserve Bank, using data from Equifax, found that people who filed for Chapter 7 bankruptcy protections saw their credit scores rebound substantially within six months when their cases were discharged.
Other benefits to consider
In addition to saving your credit score, filing for bankruptcy provides additional protections, such as:
- Ending collections: Collection agencies are notorious for their intrusive and heavy-handed methods to recover debts owed. When you file for bankruptcy, an automatic stay is issued, halting collection activity.
- Debt forgiveness: Chapter 7 bankruptcy wipes out many kinds of debt, including medical bills, credit card debt, personal loans, past-due rent, utility bills and some older tax debt.
- Access to credit: While getting lines of credit can be challenging immediately after filing for bankruptcy, studies show people completing the process are likely to qualify within 18 months, even though their credit limits may be low at first.
Know when to get help
Most people feel a moral obligation to pay what they owe. However, many find themselves reaching a point where they can no longer chip away at their debts, especially during a time of widespread economic hardship.
If you can pay your bills, that’s still the best course. However, if you are struggling and there’s no relief in sight, an experienced Florida bankruptcy attorney can help you chart a course that fits your situation and leads you to future financial freedom.