Bankruptcy eliminates Bad Credit. Most of us have some type of credit. Whether it’s a credit card, a car loan or even a house loan; we have credit. Some people have good credit. Some people have bad credit. They have foreclosures, repossessions, evictions and charge off’s. Having Bad Credit can affect your life in many ways. Bankruptcy eliminates bad credit.
Bad Credit will mean you pay a higher rate of interest for the same car versus someone with good credit. You won’t qualify for a good interest rate on a house loan and in some cases, you won’t qualify at all. It will be hard for you to get an apartment with past evictions on your credit and you very likely will have to put down a deposit for electricity and water. And in the worst case, bad credit may actually prevent you from getting a job. Bankruptcy eliminates bad credit.
Bankruptcy can help you. Bankruptcy eliminates bad credit. Bankruptcy will give you a fresh start on your road to good credit. Bear in mind that Bankruptcy does not eliminate the actual debt though. What it does is discharge you of your personal legal liability on the debt. This means you legally do not have to pay that debt. For that reason, the credit reporting agencies will report that bad credit as “included in bankruptcy” and show the amount owed as Zero. It more or less turns your old bad credit neutral. That is how bankruptcy eliminates bad credit. Also, because of the bankruptcy discharge, your future creditors know that you are no longer liable for that debt and it won’t be used against you. Of course the bankruptcy is a negative event on your credit report and will be reported for 7 or 10 years (Chapter 13 vs. Chapter7). So the bankruptcy itself will impact your credit, but remember that bankruptcy is a legal action available to you under the Federal Code. Once you have filed and received your discharge, you no longer have to pay back the discharged debts.
How could this play out in the real world? Two people are applying for the same job and have the same qualifications. One person has bad credit with credit card charge off’s and an old repossession. The second person has the same past credit on their report, but she filed for bankruptcy last year. That bad credit will be neutral on her report and will show up as “included” in her bankruptcy. As an employer, you know that the first person is still liable for that debt and it may cause them problems when debt collectors start chasing that person down. It may mean unwanted collection calls at work and it may impact the person emotionally causing interference with his job performance. You also know as an employer that the second person exercised their legal rights and now no longer has to pay back that debt. If everything is equal, who would you hire?
One thing I tell our clients is that by filing bankruptcy, it shows that you are being proactive in dealing with your debt. You are taking a legal step to clear up your past bad credit instead of waiting around for your creditors to take actions against you. Trying to decide between being proactive and reactive, I know I would think that someone who has taken an affirmative step in their life is most likely to be able to move forward from that bad past and focus on their future.
To discuss how bankruptcy can help you, please call us at (713) 974-1151 to schedule a no-obligation consultation or email us any questions at firstname.lastname@example.org.
Bankruptcy Attorneys around the nation are taking part in this Bankruptcy Alphabet. See what other excellent attorneys are saying about the letter “B” in their blog posts.