If you have fallen behind on your credit obligations, you may feel like you are trapped and there is nothing much that you can do.
And no matter what you do, your credit score and credit report will be affected. The question becomes how much will it hurt?
While filing Bankruptcy can be painful and the credit report effects longer lasting, it can stop the pain…almost immediately. The nasty creditors can no longer contact you, harass you, bother you at all for your late payments. But it will stay on your credit for up to 10 years. During that 10 years, you can begin to build credit again, however, there will always be some lenders who will treat you like a pariah forever….since you no longer have any other debt and supposedly the bankruptcy was just some bad timing, luck, whatever, and you probably want to pay all of your bills and get good credit again, it ends up being their loss…but of course, that is another post, another day.
Or there is Credit counseling. Credit counseling is designed to help you get a strict budget to follow so that you can pay back all of your debts. It is not for someone who is buried so deep that they can’t see the light at the end of the tunnel, but for someone having problems it may be a good solution. It will not affect your FICO score but there will be a notation on your credit report so some lenders may not want to do business with you. You will set up a debt management plan and once it is completed it will be removed from your report.
And then there is debt settlement. Debt settlement is a way to settle your debts for less than you owe. It will definitely affect your credit but if you are completely buried and don’t want to file bankruptcy it may be worth looking at. Debt settlements usually strive to settle the debt for 50 cents on the dollar or less.
No matter what course you take you need to try to avoid the same situations in the future, sometimes it can be just bad luck or just life that causes it, like a job loss or medical problems and those things happen but do your best to keep your credit as good as you can and like always, life goes on.