Most people only consider filing bankruptcy in New York as a last resort to their financial problems. They’ve usually missed payments on some of their loans, often credit card or mortgage debt, and their credit ratings will have dropped rapidly with a series of missed payments. In many circumstances, though, people find that their credit scores improve after filing for bankruptcy in New York. There are a few reasons for this.
Primarily, declaring bankruptcy shows that you are directly addressing your financial problems. This sounds counterintuitive, but it really isn’t. It’s more responsible to file for bankruptcy in New York than to passively allow unpaid debts to mount. In this sense, bankruptcy can be the responsible choice. Moreover, by the time people are delinquent on their bills, creditors have a good sense, based on experience, whether they’ll be able to get a handle on their debts. Surprisingly, very large creditors will write off debts before debtors consider bankruptcy. Writing off debts can take years, but until you file for bankruptcy, though, they will get come at you with everything they’ve got: seizing assets, garnishing wages, etc. Remember, your creditors don’t care about your credit rating, only about getting paid.
Beyond that, bankruptcy itself changes the composition of your credit report. All those high balances, late payments, and unpaid debts get taken off your credit report and are reclassified as “Included in Chapter 7 Bankruptcy,” for example. Simply removing burdensome debts makes your credit score better. Additionally, the methods for calculating credit scores privilege people in bankruptcy over those who are delinquent on their loans but haven’t filed. By moving from the latter category to the former, your credit situation is compared with other bankruptcy filers, which is good for you because those who take the proactive stance on their financial problems usually have better credit ratings in the long term.
These principles apply to most types of consumer debt: mortgages, auto loans, and especially credit card debt. Merely filing for bankruptcy won’t rescue a poor credit rating, but the point of bankruptcy is to resolve your financial problems, not to bump your credit score. Fixing your financial problems should be your most important concern.
For answers to more questions about creditor scores and bankruptcy, please feel free to contact experienced Brooklyn bankruptcy lawyer Bruce Weiner for a free initial consultation.
