Side effects of bankruptcy include sighs of relief, stress reduction, increased disposable income, a new respect for the budget, a long-term financial plan that includes retirement, saving, improving self-awareness, improving sex life, financial control, improving credit scores, just to name some. Stop right there. I know that you probably say, "How is my credit rating improving?" It seems illogical that the credit rating may increase due to bankruptcy, but let me explain.
Credit scores are based on so many factors in the FICO scoring system, which mainly includes the number of lines of trade (how many credit cards you have, etc.), the balance of the debt compared to the credit limit, fees and late payments are charged from accounts. judgments, etc. In the event of bankruptcy, what happens is that we liquidate the debt. The effect on the credit report is an improvement in the overall score, because you no longer carry large balances on credit lines. Even though the process of filing for bankruptcy leads to a decrease in credit rating, an improvement in the assessment is due to the elimination of debt. Many clients start receiving loan offers right after the bankruptcy case is over, because lenders know two things: (1) that you have a taste for credit; and (2) you cannot file for bankruptcy for another eight (8) years. You can recover and get a loan after bankruptcy.
Where bankruptcy cannot help
Bankruptcy does not necessarily erase all financial obligations. If you are behind on these debts, a court approved debt settlement plan in accordance with Chapter 13 of the Code can help you manage your bills. As a rule, he does not repay the following types of debts and obligations:
- Debts that arise anus bankruptcy filed
- Some debts incurred six months before filing bankruptcy
- Loaned Loans
- Debt from injuries while drunk driving
- Debts from intentional and malicious injuries to a person or property
- Some student loans
- Some taxes
In conclusion, bankruptcy is a powerful tool that will help you regain financial control either through a court approved repayment plan, or completely eliminate debts without repayment. Bankruptcy can save time and resources for paying bills. For example, you can save your home, car, and retirement accounts while getting rid of debt. You can withdraw the security deposit from your home, pay off all or part of your debts without interest. The side effects of bankruptcy can significantly outweigh the long-term consequences of inaction or more than five (5) years to get out of debt.