When facing the tough decision of entering into bankruptcy or hiring a credit repair company. There are many factors to consider. Both have their benefits and drawbacks. In today’s article I want to tackle this very important topic, and hopefully help you consider your options to make a smart and informed decision.
Bankruptcy Pros & Cons
First let’s discuss the pro’s and cons of bankruptcy. A lot of times bankruptcy is considered when a life-altering event happens, and debt become unmanageable. Sometimes it can also be considered in order to get a “fresh start”. Even though we are a credit repair company, we must also be responsible and acknowledge that bankruptcy is a good choice in some situations.
Below is our list of pros and cons of bankruptcy. This is not an all inclusive list as there are multiple types of bankruptcy that you can file. Each has it’s own set of pros and cons. I will mention that you should only consider bankruptcy if you have a large amount of debt that you cannot afford to pay, rather than using it as an easy way out to get a fresh start on your credit. Here’s a link to another article from Lending Tree, discussing the pros & cons of bankruptcy.
| Bankruptcy Pros | Bankruptcy Cons |
|---|---|
| Resolves Debt | On Credit Report Up To 10 Years |
| Gives Your Credit A Clean Slate Once It Comes Off The Credit Report | You Lose Your Home Or Vehicle Depending Type Of Bankruptcy |
| You May Be Able To Make Another Major Purchase 2 Years Out | You Might Find It Difficult To Obtain Credit From Some Creditors |
| May Make Unaffordable Debt More Affordable To Pay Off | Can Be Expensive To File |
| Can Make An Even Bigger Mess On Your Credit Report (Your Creditors May Still Attempt To Report Even After The Debt Has Been Discharged) | |
| You May Still Need Credit Repair |
credit repair pros & cons
Credit Repair can also have it’s pros and cons you should also consider. Although credit repair is a good follow-up to bankruptcy, especially to get one removed from your credit report, there are still several things you need to consider before going though the credit repair process. Although credit repair, especially pre-litigation credit repair, can help anyone, credit repair is not for everyone. Below is a listing of our pros and cons for credit repair.
Credit Repair Pros/Cons
Pros
- Can get negative items, even bankruptcies, off of your credit report.
- You can GET PAID for errors on your credit report. (If the credit repair company practices pre-litigation credit repair)
- You can also GET PAID for debt collection violations.
- Credit repair professionals can help you rebuild your credit profile.
- Credit repair can help you qualify for large loans like mortgages and car loans very quickly.
- With the proper training and research, you can repair your credit on your own.
- An overall good investment in your credit health.
Cons
- You can run into scams with illegitimate companies.
- Can be pricey initially.
- Can be a long process.
- Many larger well known companies are not effective.
- Although this is gaining steam, it is hard to find a company that practices pre-litigation credit repair.
- Even if a negative item is removed from your credit report, you still owe the debt unless a judge or arbiter gavels it away.
- So much misinformation on the internet that could do more damage to your credit than good.
Explore Your Options
Taking time to explore your options before you act can be of great benefit. Is your credit bad, and you need a fresh start? Are you in a ton of debt? Can you pay your current debt obligations? These are all questions you should be asking yourself before you take action. Below, I want to give a little chart that may assist you in the decision making process.
| Situation/Scenario | Credit Repair | Bankruptcy |
|---|---|---|
| Large Debts Unable To Pay | x | |
| Many Small Debts That Add Up | x | x |
| Debts You Can Settle Or Pay | x | |
| To Get A Mortgage In 1yr or Less | x | |
| To Get A Fresh Credit Start | x | x |
| In Danger Or Being Sued By A Creditor Or Debt Buyer | x |
Final Thoughts
Taking charge of your credit and your financial situation is never easy. I will encourage the reader that where there is a will there is always a way! All it takes is the mindset that you will improve your situation and do whatever it takes to get there. Hopefully this little guide has been helpful. Both bankruptcy and credit repair are great options to help you get back on track, or to start over again. We were never taught in school how to manage
credit. The credit system can be a complicated beast that can be difficult to navigate. At Credit Wellness Solutions, we are there for you every step of the way, and will help you understand how to manage credit, fix your credit, get you PAID when the credit bureaus and data furnishers fail to report items on your credit to “maximum possible accuracy”. And to educate you about bankruptcy and credit repair. Our services are perfect after a bankruptcy too as we can help get those removed! To learn more, schedule a Free Consultation Today!
