For people struggling with serious financial problems, bankruptcy can seem like an attractive way out. When people start thinking about turning to this option, their credit may already be severely damaged and they may be having a difficult time getting approved for even small credit amounts. In this situation, they may view bankruptcy as the last and only remaining option. This conclusion is reinforced frequently by advertisements, paid for by attorneys who make a living solely on handling bankruptcy proceedings, that describe it as the best way to get out of debt, stop being harassed by creditors, and gain some peace of mind.
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Many people who declare bankruptcy quickly end up regretting their decision when they realize that while they don't owe as much money (bankruptcy rarely clears you of all of your financial obligations), they still haven't solved their credit problems. Bankruptcy in fact is perhaps the worst thing you can do for your credit. If you have a bankruptcy recorded on your credit report, most creditors will not even consider giving you any money because you represent a severe risk of nonpayment based on your past. Bankruptcy will almost certainly lower your credit score by a full 100 points, and often by much more.
Getting a home loan, car loan, or even a credit card with a low limit often becomes impossible and you are forced to live on a cash only basis. Perhaps most frightening is the fact that these effects can last for up to 10 years, until the bankruptcy is removed from your credit report! What initially looked like a great option can quickly become even more of a financial nightmare.
For many people who have declared bankruptcy, obtaining additional credit afterwards can end up being even more of a problem. It's common to hear radio advertisements for car dealers that guarantee approvals even for people with bankruptcies. Even some credit card lenders will prey upon people who have recently been through bankruptcy, because they know that you won't be able to declare bankruptcy again. This means that they can charge outrageous interest and set dangerous credit terms and you won't be able to do anything about it. This can result in payments that quickly get out of control, landing you in deeper trouble without a way out.
There may be cases where bankruptcy is a valid option, but much too frequently it is falsely presented as the best way to solve your financial problems. For most people, there are other ways to improve their credit and regain a stable economic position in less than the seven to ten years required by bankruptcy. If repairing your credit is your goal, bankruptcy is probably not the best option. You can often accomplish this while still paying your bills and having enough left over to contribute to paying down your debt. There are people whose job it is to help you fix your credit, and they're waiting for you to contact them so you can get started on the road to financial success.
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