A lot of people in New Jersey think that bankruptcy is the worst thing you can do for your credit score. Bankruptcy gets a bad rap, but it’s not always deserved. In fact, if you’re facing liens, foreclosures and collection attempts, filing for bankruptcy could actually raise your credit score.
What the research shows
Researchers from the Federal Reserve Bank of Philadelphia looked at the impact that bankruptcy has on credit scores. What they found was that most bankruptcy filers experienced a huge drop in their credit score in the 18 months that preceded their bankruptcy filing. Once these people took the plunge and filed for bankruptcy, it wasn’t a hard landing, and their scores actually went up.
Think about the big picture
Most people don’t want to file for bankruptcy, which is why they delay filing until their credit scores are in the dumps. Often, these people end up draining their savings accounts and selling off all of their possessions trying to pay off debts that are out of their reach. If you think about the big picture, you may realize that trying to pay off all of your debts is going to put you in a worse situation than the one you’re in now.
Bankruptcy stops collection attempts
While the bankruptcy process takes a few months to complete, the relief that you can get from the automatic stay happens as soon as you file. Once those collection calls stop coming, you can stop thinking about the pile of bills you have and start focusing on the future. For a lot of people who have endured years of financial stress, the beginning of the bankruptcy process is a welcome break. You may want to talk to a bankruptcy attorney about getting your life back.