3. Bankruptcy Can Reduce Your Debt
Though the term has a negative connotation, bankruptcy can help you lower your debt and provide relief. Using this as a credit repair option can take time, but it is doable. You’ve got to pay a lawyer to help with the bankruptcy. During this time, you can tell debt collectors and credit card companies that you’re in the process of filing. With that, they can’t continue to ask for money or harass you. This is called an automatic stay and could help stop wage garnishments, foreclosures, evictions, and utility shutoffs.
Generally, bankruptcy only works on dischargeable debts, such as those from credit cards and other bills. You must continue to pay child support and other things. Still, if you have high amounts of debt like that, it could be the best way to get rid of it and start over.
Remember, the bankruptcy shows on your credit report for up to 10 years, lowering your score. That said, most credit card companies and lenders know that you can’t file again for a while. Therefore, they may be more willing to send out new cards or give you a loan.
As part of the bankruptcy proceedings, you’re required to take a credit counselling class. This helps you get the education you need to rebuild credit scores and find new financial habits. Often, financing budgeting is part of this. Learning to create a budget ensures that you live within your means and reduce your risk of getting into debt again later.
