Five Ways Bankruptcy Improves Your Credit Score

For many Americans, bankruptcy is a desperate, final option shrouded in shame and feelings of failure. While we often think those who file bankruptcy have lost it all, in reality, it is a smart decision designed to help protect your financial well-being. Knowing your options for debt solution in Delray Beach gives you the freedom to choose the path of your financial future. In fact, despite misconceptions, filing bankruptcy can improve your credit score. Here’s how: 

Chapter 13 Bankruptcy Reports Regular Payments to Credit Bureaus 

Chapter 13 bankruptcy allows people with a source of regular income to create a repayment plan with creditors. Over the course of three to five years, you can make manageable monthly payments toward eliminating your debt and improving your credit score. Because you are making regular payments, this form of debt solution in Delray Beach greatly improves your score.  

Because chapter 13 bankruptcy consolidates your debt into one monthly payment, it makes it easier to manage your monthly budget and ensure your payments are on time. Reassessing your income and developing a repayment plan that works for you helps to remove the weight and stress of debt from your shoulders so you can move forward.  

Chapter 7 Bankruptcy Liquidation Increases Cash Flow 

Filing chapter 7 bankruptcy liquidates your assets to eliminate unsecured debts. This is typically reserved for individuals, married couples, and businesses that qualify: 

  • Monthly income below Florida’s median income 
  • Submit a chapter 7 means test calculation 

If you qualify for chapter 7 bankruptcy, a trustee will be in charge of liquidating your assets to resolve your debts. Debt solution in Delray Beach with Mufson Law keeps you and your well-being as our top priority. Learn more about our bankruptcy services here. 

Chapter 7 bankruptcy asset liquidation creates greater cash flow. By eliminating debts and increasing your expendable cash, this form of debt solution can improve your credit score by opening the doors to credit rebuilding. Creditors recognize the dissolution of prior debts and are more likely to extend opportunities for rebuilding your credit score. By proving yourself better capable of credit management and debt repayment, your crediting options expand to allow for improving your credit standing. 

Removal of Delinquent Accounts 

The greatest benefit of filing for bankruptcy is removal of delinquent accounts from your credit report. Delinquent accounts have the greatest impact on your credit score, signifying an inability to repay loans and lines of credit. Whether through repayment or liquidation, being able to settle these debts and remove them from your report can quickly increase your credit score. Bankruptcy law firms in Delray Beach can help to guide you through the process of removing delinquent accounts from your report so you can rebuild healthy credit. 

Improve Debt-to-Credit Ratio 

Having high debt in relation to your available credit can stand in the way of your future more than a low credit score. Maxed out credit cards and failure to adhere to a loan repayment plan can quickly create formidable, mounting debt that seems impossible to overcome. Attempting to open additional lines of credit are more likely to be denied, as creditors are reluctant to lend money to customers they perceive as unable to repay. Filing bankruptcy to settle high debt can even out this ratio, establishing trustworthiness for future credit. 

Provide the Opportunity to Rebuild 

Filing bankruptcy is not the end of the world, nor does it mean you are trapped in your current financial situation. As a debt solution in Delray Beach, the intention is to give you another chance to get things right. By settling or eliminating debts, bankruptcy allows you to use new financial knowledge to establish a healthy relationship with your finances. Discipline and adherence to your budget can help to create a better future for you and your family. 

For more information about bankruptcy and assistance determining your next move, contact Mufson Law today!