Bankruptcy is not something that anyone wants to consider. Unfortunately, sometimes this is a necessary legal solution in order to move forward and get in a better financial situation. In Topeka, KS, a bankruptcy lawyer will go over your filing options and answer any questions you may have. If you’re still unsure if bankruptcy is something you should move forward with, consider the following short-term positive effects bankruptcy can afford you.
Bankruptcy Can Rid Your Credit Report of Delinquent Accounts
A delinquent account will continue to bring your credit score down. When a bankruptcy is complete, all debts are paid and, therefore, there will be no more delinquent accounts on your credit report. Your credit report will report that the account has been paid and is no longer being actively pursued for collection. Over time, your credit score will reflect this change.
Bankruptcy Will Improve Your Debt-to-Income Ratio
Debt-to-income ratios account for 30% of your credit score, according to NOLO.com. When credit cards or line of credits are exhausted, your debt-to-income ratio is considered high. The higher the ratio is the lower your credit score. Ideally, you want to keep this ratio as low as possible. Because bankruptcy can eliminate or significantly reduce the amount of debt you owe, in the short-term your credit score should respond in a positive manner. If you do not apply for any more credit and keep your debt-to-income ratio low, your credit score will continue to rebound and increase over the long term.
Bankruptcy is not an option for everyone. Whether or not you should file depends on your overall financial goals and individual situation. For these reasons, you should always call a Topeka, KS, bankruptcy lawyer to discuss your financial situation before you decide to file. A bankruptcy lawyer will explain the different kinds of bankruptcy filings and which one will work best for your financial goals and predicament.
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