Facing a mountain of bills is always a daunting experience. Many people in Illinois tap into retirement accounts hoping to manage overwhelming debt. Others continue to rely on credit to put food on the table or pay other obligations, only to fall further behind.
The reasons individuals may choose to delay taking action to regain control of their finances vary greatly. One common fear that people have that causes them to try to stay afloat during a difficult time is the misconception that filing for bankruptcy will destroy their credit for years to come.
You Can Rebuild Credit After Bankruptcy
Rebuilding credit after a bankruptcy is not only possible, but it also may happen sooner than you may think. Financial pundits say that in some cases, filing for bankruptcy may actually help to improve your credit score. The Federal Reserve Bank of Philadelphia conducted a study that focused on credit scores and bankruptcy.
The researchers determined that in 2010, the average Equifax credit score for consumers filing for Chapter 7 bankruptcy was 538.2. With the caseload at the time, it took an average of six months from filing to discharge. The researchers say that at the time of discharge, the average credit score among the same consumers rose to 620.3.
A Fresh Start May Be The Best Solution
In a society that relies on plastic for many daily activities, it may seem understandable to worry about a credit score more than finding a positive solution that can provide a fresh start. The trouble with fretting about credit when the bills have become unmanageable, however, may not necessarily be providing the desired benefit. When bill collectors are on the trail of an individual, they have legal tools, including civil creditor lawsuits, wage garnishment, foreclosure and repossession.
Moreover, late payments, missed payments and increased credit balances are likely already putting downward pressure on the credit score. By the time an individual decides to seek debt relief, his or her credit score is often already in trouble.