Many debtors are surprised to learn that - over time - a bankruptcy can actually improve a person's credit. Thus, for many South Carolina debtors, bankruptcy is the best option for improving their overall financial situation. Learn more about how bankruptcy can improve a person's credit, and the other options which are available to persons burdened by debt.
The Benefits of Bankruptcy
A successful bankruptcy improves a person's debt-to-income ratio. By legally discharging debt, overall debt is reduced, and the ratio becomes more favorable. Debt-to-income ratio is an important part of many credit ratings and financing decisions. Another important component of a person's credit rating is his or her history of timely payments. When a person is heavily burdened by debt, timely payments are often impossible. By discharging debt, a person can have a fresh start, and begin establishing timely payments on different lines of credit. This, too, improves the overall credit score.
In spite of these benefits, many debtors are reasonably concerned about the detriments of bankruptcy. Chapter 7 bankruptcies are reported to the credit bureaus for seven years, while Chapter 13 bankruptcies are reported for ten years. While these reports do have a temporary negative effect upon one's credit, many debtors eventually have an improved credit score and credit ratings. This is largely due to the improved debt to income ratio, as well as a new history of timely payments. Like all financial decisions, bankruptcy is a cost/benefit analysis. If the benefits out bankruptcy outweigh the temporary negative effects for a specific situation, it is the appropriate solution. If not, there are many other options a debtor can explore to improve his or her overall financial situation.
Other Options for Getting Out of Debt
When bankruptcy is not the appropriate solution, debtors have many other options to improve their financial health. Debt consolidation allows debtors to lump debts together into a single monthly payment with a lower interest rate than those demanded by multiple debtors. One Spartanburg credit union even promoted such a program with the recent solar eclipse: according to CU Insight, Spartan Federal Credit Union offered an "eclipse your debt" promotion, by which debtors could apply for a personal loan at an interest rate of 8.21 percent. The personal loan was designed to allow debtors to pay off debts with higher interest rates, so they could meet the more manageable interest rate offered by the eclipse loan.
Another option is debt negotiation. When creditors know that their debt is able to be discharged in bankruptcy, they are often willing to accept a payoff amount which is lower than the total due. This allows the creditor to receive some payment on the debt, rather than having it completely erased by the bankruptcy court. Debtors can often negotiate a buyout at pennies on the dollar.
There are many avenues for debt relief. Don't suffer in silence.We will help you find the financial solutions right for you.