Posts Tagged ‘effects of bankruptcy on credit’

Effects Of Bankruptcy On Your Credit

There are three major credit bureaus in the United States of America that prepare the credit reports of American consumers. It is very important for you to understand that there can be very serious negative effects of bankruptcy on your credit. That is the reason why it is always advised to use bankruptcy only as a last resort. You should not look at it as an easy option to get rid of debt problems. Though it is true that most of the debts are discharged under bankruptcy protection, it is also true that once you are officially declared bankrupt by court, you are on a road, where financial journey is very difficult because of the damaged credit caused by bankruptcy. Before you go ahead and file your petition for bankruptcy, you must seriously work on the possible alternatives to bankruptcy. a reputable lawyer or a credit counselor can suggest you an array of better alternatives that are less damaging to your credit. Following is a brief rundown on some of the different aspects associated with how bankruptcy affects your credit.

Negative Entries On A Credit Report

While you are trying to understand the effects of bankruptcy on your credit, it is important to note that bankruptcy is the worst negative entries that can appear on a credit report. Other negative entries that are comparatively less damaging to your credit include foreclosures, debt accounts with collection status, late payments, missed payments, and other such things. The entries regarding bankruptcy stay on your credit report for a period of ten years. There is no legal way to remove these entries before that. You must be wary of those credit repair agencies that claim to be smart enough to remove all negative entries form your report even if the entries are correct and complete. Always remember, only wrong and incomplete entries can be removed or corrected by filing dispute with a credit bureau, not the correct ones.

How Your Financial Life Is Affected?

It is no more a secret that the financial life of an American consumer runs on credit. The negative effects of bankruptcy on your credit may hurt your financial journey in an array of different ways. There are many occasions when people who are having or going to have some financial transactions with check your report to evaluate your financial position. When they see that you have already been declared as a bankrupt, they may not be willing to do business with you. For example, if you are applying for a loan, the lender may reject your application on the basis of bad credit (caused by bankruptcy). Bankruptcy is an indication that you failed to repay the loans you had borrowed from your past lenders. That is the reason why you are treated as a very high-risk borrower. Even if a lender agrees to lend you a loan, they are very much likely to charge you a comparatively very high rate of interest. Besides that, you may also have to face difficulty while you are trying to get an apartment on rent. The landlord may not agree to accept you as a tenant when they see bankruptcy on your credit report. They will also look at you as a high-risk tenant who may not be able to pay the rent in a timely manner. Even your employment opportunities may also get affected because of bad credit, especially if the job profile requires you to handle accounting tasks. The employers will look at you as someone who is likely to commit fraud because they know you are going through financial hardship.

Alternatives To Bankruptcy

As you can see, the effects of bankruptcy on your credit can be quite damaging, which may just ruin your financial life for next many years. Therefore, if you are considering filing a petition for bankruptcy, you are strongly recommended to think about better alternatives. There can be several possible alternatives that you may like to go for depending upon the factors involved in your specific case. For example, you can consider signing up with a debt settlement program, which may allow you to settle your entire debt by paying less than the actual outstanding amount you owe to your creditors. Though this type of debt settlement will also negatively affect your credit, but the effects will not be as damaging as it can be in case of bankruptcy.

Overall, a thorough understanding of the effects of bankruptcy on your credit is crucial, especially if you are facing serious financial hardship and are unable to manage your debts on your own and so are now considering seeking bankruptcy protection. Use it only as a last resort, when all other alternatives fail to work.

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