Facing up to financial life in modern-day America often involves tradeoffs between short-term and long-term goals.
For example, someone who is in urgent need of debt relief may try to just tough it out a little longer, rather than biting the bullet and filing for bankruptcy. Sometimes people do this, in part, because they’ve heard that filing bankruptcy can hurt their credit.
In this post, we will address that issue. Our point will be that a bankruptcy filing, by helping someone get out of debt, can be a helpful step in building better credit for the longer term.
To be sure, a bankruptcy filing does not help your credit score in the short term. Indeed, it may cause your credit score to take another hit.
Chances are, however, that if you are considering a bankruptcy filing because of unsustainable debt your credit score has already been compromised.
Moreover, there are ways to rebuild credit after bankruptcy, such as by starting with pre-paid debit cards. Indeed, it may even to possible to eventually qualify for a mortgage again. We discussed this issue last year in our October 30 post.
In short, a past bankruptcy is not necessarily something that will continue to haunt you. If you are taking the right steps to rebuild credit and move forward, the debt relief that bankruptcy provides can help you get the fresh start that bankruptcy law is intended to provide.
Of course, you still need to manage your finances prudently. But keeping tabs on your credit scores after bankruptcy can be a useful tool that helps you maintain fiscal discipline and get back on a firmer financial footing.
Source: MSN Money, “The first thing to do before paying off debt,” Dec. 19, 2013