Thinking about bankruptcy and personal credit scores

Americans have learned to be very protective of their credit scores. Even if we don’t know exactly how our scores are calculated, we know that this three-digit number can be the difference between getting a line of credit and being denied. It can also mean the difference between a low interest rate and one that is unreasonably and unaffordably high.

Many people are reluctant to file for bankruptcy because of the effects of bankruptcy on credit. But if you have money issues that include a burdensome amount of debt, your credit score may actually be the least of your problems. Moreover, failure to address the larger financial issues could ultimately ruin your credit score anyway.

As an example, let’s say you have credit card debt amounting to $50,000 or more but your credit score is still reasonably high. You might consider debt consolidation or some other strategy that essentially just moves the debt around. But there is no guarantee that such actions will preserve your credit score. Moreover, failure to address the debt and underlying debt issues will likely hurt your credit score in the long run.

To be sure, filing for bankruptcy is a major decision that comes with negative as well as positive consequences. But the effect of bankruptcy on credit is just one of many considerations. If you are considering bankruptcy but aren’t sure if it is right for you, an experienced bankruptcy attorney can help you assess your overall financial health and inform you of your rights and legal options.

Source: Fox Business, “Will Debt Consolidation Wreck My Credit?” Steve Bucci, June 10, 2014

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