I’m sure that I’ve written about this topic before and yet this week I received another call from someone who didn’t feel that ANY amount of help could help them and that they were going to need to file for bankruptcy.
Now, I must preface this by saying that I am not an attorney nor can I give legal advice, however, I have also shared my story where I have shared my ups and downs and in the realms of downs…yes, the dreaded filing of my own bankruptcy.
If any of you have been through a bankruptcy process, you will probably agree with me that the first place you start is a bankruptcy attorney. I will be so bold as to say that they are the LAST place you should go for advice because that is, in fact, their livelihood! (Live and Learn)
My immediate question for this person was, “What is the total of debt that you owe?”. At this point in my experience, it never surprises me that they don’t even know. Denial is an ingredient of poor credit. I continued to drive to get an answer and what I heard next is something again that did not surprise me. “Oh, probably about $10,000.00”.
What is Bankruptcy?
Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get relief from their debt. Bankruptcy allows individuals or businesses to either restructure their debts or absolve them completely. Typically, a bankruptcy filing stops all of your creditors from attempting to collect payments from you immediately or at least until your obligations are sorted out according to the law.
Why Apply For Bankruptcy?
When there are no other options available to you, filing for bankruptcy may give a much-needed opportunity to gain control of your finances. For example, bankruptcy may make it possible to:
- Stop wage garnishments and harassing phone calls and letters from creditors.
- Legally relieve you from most or all of your debts.
- Prevent a foreclosure or repossession of your car and allow you to catch up on missed payments.
- Prevent you from having your utilities shut off.
How Will Bankruptcy Affect My Credit Score?
If you have seriously considered filing for bankruptcy, chances are your credit is already in poor shape. However, since bankruptcy either wipes out your old debts or sets up a repayment plan, you will likely be in a better position to pay any current bills that you may owe. A bankruptcy will remain on your credit file for up to ten years, but you can begin to rebuild your credit history immediately by keeping your bills paid on time, not applying for excessive credit, and using only a small percentage of the credit limit available to you. Here is another article I wrote about “Utilization Ratios”.
Next week, I will cover the different types of bankruptcies as there are more than you probably think!
I’ll talk more about what it cannot do along with some alternatives. Definitely worth staying tuned!
So back to the opening story, it is important for me as a coach and credit professional to know the whole story. When it is you and you are that far into it, into the denial and into the overwhelm, you really do need outside professional guidance from the right source.
Bankruptcy can stay on your credit reports for ten years while other derogatory credit can drop off after seven years. There are always action steps you can take depending on your ultimate decision and I always recommend making an action plan and working your action plan.
Remember to check in next week for Part 2. Reach out to me if you have questions and remember…Knowledge is power!
Your Partner in Credit Restoration,
As always, if you have errors on your credit reports or items that do not belong to you and you are not having success getting them removed, please take action and contact me.
For questions or additional resources, please email: Info@CreditGal.CO