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Why you might not regret filing for bankruptcy

On Behalf of | May 10, 2024 | Bankruptcy |

Filing for bankruptcy may make it possible to keep your Connecticut home or other assets. However, it could also result in a significant drop in your credit score and other long-term financial consequences. Therefore, it’s understandable that you might have some concerns about the impact of filing even if it may be a better alternative to dealing with creditor collection efforts.

Filing can provide a clean slate

Many types of debts may be completely discharged after filing for bankruptcy. This means that your $20,000 in credit card debt could be wiped away in a matter of months. After this happens, you can then start to build an emergency fund or take steps to rebuild your credit. In some cases, you may be approved for credit cards or other lines of credit within weeks or months of obtaining a discharge.

Come to grips with your debt load

Filing for bankruptcy can force you to pay attention to your debt load and overall financial management habits. After your debts are wiped away, you’re more likely to create a budget or take other steps to avoid having to file again in the future. This is important because you can’t file for Chapter 7 protection more than once every eight years.

Your credit score doesn’t matter if you’re in debt

You may be worried that filing for bankruptcy will tank your credit score. While this may be true, creditors generally don’t want to lend to people with high debt-to-income ratios. Therefore, you may not be in a position to get a mortgage or a new car until your debt is taken care of in some fashion. It’s worth noting that depending on your circumstances when filing, your score can actually go up after seeking protection from creditors.

Filing for bankruptcy may allow you to keep property while eliminating most or all of your debts. It may also be possible to put an end to wage garnishment, lawsuits or other creditor collection activities for several months or years depending on the type of case you file.

photo of attorney R. Richard Croce