There is a definite stigma to filing bankruptcy that causes many to avoid it, even when it is their best option. This legal debt relief tool provides a lifeline for those drowning in credit card debt, unexpected medical bills or unfortunate professional choices. While it does affect your credit rating in the short term, bankruptcy does not follow those who file for the rest of their lives.
You are not alone
There were an estimated 1.1 million people who filed bankruptcy in 2008 during the height of the recession. This was a 32 percent increase over the previous year. In the years to follow there have times when times where the economy has had a hiccup. This causes lenders to pause or tighten requirements for credit.
Those who have filed bankruptcy should not become disheartened because the ebb and flow of finance. It simply means that it is best to keep the big picture in mind and keep that credit record clean and ask again if you loan is denied, either ask a different lender or bide your time a few months later.
The time to recovery
There are certain milestones to recovery from a bankruptcy. These times are based from the point your debts are discharged:
- Six months: Your credit will not clear up immediately. Even staying current with bills during the first six months won’t change that, but you have to start somewhere.
- One year: After a year, you should start to see your credit score go up as the records for paying bills are recognized.
- Two years: According to one recent article, those who keep a good credit standing for 18 to 24 months after bankruptcy discharge will often be approved for a mortgage or a loan to buy a car.
- 10 years later: A bankruptcy can stay on your credit report for 10 years, but the effects of the bankruptcy will become less and less as long as you stay in good standing.
Not easy, but the rewards are many
No one said it would be easy. But filing with help of an attorney and working with other financial advisors can provide a solution to the financial woes.