Bankruptcy Can Improve Your Credit Score
Did you know that bankruptcy can actually improve your credit score? Believe it or not, it can. This is definitely true especially in the Orlando area where many houses are underwater, and debtors have often already defaulted on their home or business mortgage payments. This is because by the time most people decide to file bankruptcy, they have already found themselves unable to pay their outstanding obligations. Their failure to pay these debts has already reduced their beacon/credit score considerably. By filing bankruptcy, you show the credit agencies that you are taking proactive steps to address your debt situation. This newfound regard to your financial state signals that, even if your creditors are not going to be completely paid, you are trying your best to handle your financial situation. Within twelve months of filing bankrutpcy, you will find that your credit score will have actually increased from its present level due to any recent defaults in your loan payment obligations. This is as true for missing payments on credit card debt as it is for your home mortgage or any other debt that is secured by collateral- such as a vehicle.
You might wonder why the credit score would increase, given that bankruptcy signals often creditors won't get paid. Well, the fact is that they probably wouldn't have been completely paid even if you hadn't filed bankruptcy. While they would have retained their rights to collect on their debts if you ever came into money, it is often the case that debts (especially credit card type debts), are written off by these companies long before you are able to pay it back completely. Even so, it would take years for them to write the debt off, and in the meantime they will do what they can to garnish your accounts and seize your assets to attempt to satisfy any outstanding and delinquent balances.
