Real Answers for Life’s Money Challenges
I am about to file for bankruptcy.
My credit card debt of about $50,000 became impossible due to rising interest rates.
I take no pleasure in this decision but finally realizing I could no longer keep afloat.
My pension and Social Security payout is now sufficient for monthly living.
Giving up my debt makes me feel very sad, but its the only solution available.
yo advise what happens after the filing.
-S.
Dear S.,
Bankruptcy has an apocalyptic effect on your credit, as youre probably aware.
Its not uncommon to see your credit scores drop by 200 points or more.
Yes, making on-time mortgage and car payments will help boost your score gradually.
But Im not so concerned about the hit your credit is about to take.
Your credit card debt will typically be discharged by bankruptcy.
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This is a long list, so dont get overwhelmed.
Well keep it updated as offers changes or expire.
Basically, a bankruptcy cancels all your contracts, including your credit card agreements.
But the effect is most severe in the first year or two after bankruptcy.
Your credit score can rebound long before the bankruptcy record disappears from your reports.
Many people see improvements within a year or two, so the 24-month timeline your lawyer suggests sounds reasonable.
But now is not the time to be thinking about credit cards.
Make a plan you’re able to stick to long after youve re-established credit.
You dont need credit to survive.
When used correctly, bankruptcy can give you a clean slate.
Robin Hartill is a senior editor at The Penny Hoarder and the voice behind Dear Penny.
Send your questions about debt to[email protected].
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