You decide to declare bankruptcy. Before you do it, you mention your decision to a friend or a family member. Maybe you're looking for advice or feedback. Maybe you're just making conversation. Either way, you definitely get some feedback, and your friend is critical of the whole process.
What they tell you is that it's better to pay off all of the money that you already owe. They insist that, even if it takes time, you should keep chipping away at it. They act as if declaring bankruptcy is clearly worse than trying to pay everything yourself.
It's a popular myth, but it's not always true. Declaring bankruptcy is often the better option.
Your credit score
The reason for the myth is that people feel very worried to negatively impact their credit score. "You'll never get a loan again," they tell you.
You should know that bankruptcy can and does impact your credit score. That's not inaccurate. But it also does not mean that you're better off to pay back the debt.
For one thing, you can help your score rebound. Using secured credit cards is one way to do it. You get them with a deposit and then pay off the small amount of debt every month, building your score back up and showing lenders that your financial issues are behind you. It takes time, but you can fix it. Saying you'll never get a loan again is completely false. You just have to know how to do it.
The second reason that this is a myth is that having overwhelming debt also impacts your credit score. Think about how much you owe. Can you pay it off in the next few years? Every month that goes by with missed payments both increases your debt and hurts your score. If that goes on for years, are you really better off? It's not as if having all of that debt and those missed payments on your financial records help you. It still shows lenders that they should not give you a loan.
So, don't assume that bankruptcy is the only negative thing you can do for your score. It can actually turn into a positive when you get rid of your debt and improve your financial position. You take control of your finances again and you make it so that lenders will trust you in the long run. You have to think about the big picture.
This is just one bankruptcy myth, but it's time to move past it if it has been holding you back. Give us a call today and we'll help you explore all of the legal options you have.