What is Bankruptcy?
A potential (but weighty) solution to resolving insurmountable debts, bankruptcy is a legal process to resolve outstanding loans or repayments. This can help to resolve significant financial issues, but the process will leave a long-term mark against your credit report that can be difficult to remove.
Declaring yourself bankrupt involves the filing a formal petition with an adjudicator. If passed, it allows your debts to be nullified and to enable your creditor to profit from the sale of certain assets in your possession. Alternatively, your creditors can file to declare you bankrupt due to a failure, inability, or unwillingness to repay debts. While this is almost always a last resort option, many bodies will choose to pursue it if there is no other recourse available to them.
How can it affect your report?
Unfortunately, bankruptcy will always be a black mark on you against your credit report.
Once active, a bankruptcy will remain on your report indefinitely and will stay on your report for six years after it is discharged. The significance of this cannot be underestimated as your credit report will be visible to potential insurance providers, employers, and landlords alike. This makes it extremely difficult to escape from and should only be considered with the fullest of caution. And with personal insolvency levels at a near record high, being aware of your finances is more important than ever.
As a result of a declaration, your credit score can end significantly downgraded and affect your ability to take out new forms of credit.
What else should I know?
If it’s right for you: When bankruptcy is declared, the sale of your assets will go toward covering the cost of any money owed. This means that if your valid assets outstrip the value of your debt, declaring bankruptcy may not be the best option for your situation. Always consult a reliable advisor before making any significant financial decisions and be sure to take enough time to make the right decision for you and your dependents.
What debts are covered: Declaring bankruptcy will clear certain debts, but it is worth remembering that there are many kinds that will not be covered. These can include, but are not limited to: court fines, student loans, maintenance payments, secured loans, debts owed due to negligence, or causing injury to others. Make sure you have full oversight of all your debts before making your declaration and – if in doubt – always pursue advice about what options are right for you..
How to clear your credit report: While bankruptcy will clear your valid debts, it is worth remembering that the long-term impact on your credit report can be severe. Before filing a declaration, take some time to understand the options available to you whether it’s disputing irregularities, putting together a regular payment scheme, or embedding best-practice steps into your regular financial management tasks.
If you want to review best-guidance information about managing your credit report after declaring bankruptcy, you learn more at Crediful. Our team is happy to work with you to help find a solution to your problems and help you make the right decision to protect you and your loved ones in the years to come.