A common question I get from clients considering bankruptcy is what it will do to their credit. Sometimes they are current on all of their debt payments but just can't afford to keep them up anymore, or they are woefully behind. Unfortunately, what bankruptcy can do to a credit score is different for each person.
Know the Score!
It is for this reason that I ask the follow-up question: What are your scores? I usually get a blank stare in response. Usually it is because they are afraid to find out, but they usually assume it is "bad."
Well, if they are current on their payments on all debt (even if it just means that they have been making the minimum payments), they could look good on paper and not have bad credit at all.
So for everyone out there who is worried about what bankruptcy could do to their credit, go out and check all three of your credit scores. It's okay; I'll wait.
What Do Your Scores Say?
Got them? Okay, what are they? If they all fall into a range that is below 600, then bankruptcy will most likely not do much more to you than has already been done; you already have bad credit.
If no one would lend you money now anyway, then quite frankly what do you have to lose? Rip off the bandage quickly, take the hit, and then start rebuilding your financial life (and credit score). There are lots of ways to do this.
If, on the other hand, your scores are close to or over 700, then you could take a hit of 100-150 points on your scores. In other words, bankruptcy will probably knock you down below 600. Here is where you look good on paper, but do not have a sustainable financial situation. You need to take that leap of faith that things will get worse before they get better.
The Bitter Bankruptcy Pill Can Make You Better
That is where the decision to file is so hard. What you need to realize, however, is that bankruptcy is often a necessary step to getting out of a financial hole. Yes, your scores will drop, but that is the "bitter pill" you must take in order to get better.
If you are a southern New Jersey resident, living in the Gloucester County area, and are considering bankruptcy but worried about the credit impact and not sure filing is a good idea, feel free to give me a call at 856-432-4113 or contact me through this site to schedule an appointment to discuss your options. You might find yourself wishing you had done it a long time ago!
If you have more questions about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.