Filing for bankruptcy may result in the loss of a Florida home, a vehicle or other assets. However, it may also eliminate credit card, medical or other debt balances that may be stopping you from creating a stronger financial future. Let’s take a closer look at why seeking protection from creditors may actually be a net benefit over a period of time.
Bankruptcy may reduce or eliminate debts with high interest rates
It isn’t uncommon to pay interest rates of 20% or more on a credit card balance. Depending on your credit score or creditworthiness, you may also pay up to 10% or more on car or other types of secured loans. Filing for bankruptcy means that you no longer have to watch a debt balance remain the same despite the fact that you’re paying $500, $1,000 or more each month to a lender.
Bankruptcy may result in an immediate increase to your credit score
In some cases, filing for bankruptcy can actually improve a person’s credit score almost instantly. This may be true in your case if filing allows you to get rid of debts that were significantly past due or already in collections. The same may be true if your debt-to-income (DTI) ratio goes down significantly as a result of debts being discharged. It’s worth noting that it typically takes about 24 months to see a full credit recovery after seeking protection from creditors.
If you are struggling to keep up with your bills, it may be a good idea to file for bankruptcy. This is because doing so may allow you to eliminate certain debt balances and obtain partial relief on others. Furthermore, you’ll likely receive an automatic stay against creditor collection activities simply by filing.