Let’s take a minute to look at the consequences of bankruptcy versus credit counseling. You could run into several difficult situations resulting from either one of these choices. I’m a bankruptcy and I’ve worked with a lot of different people considering (and taking action to complete) one or the other of the two options listed above. In many situations, it’s the most appropriate course of action. Having said that, I must state that I disagree with both scenarios. However, they do exist in our world today, so let’s discuss how they can affect your future.
Your future employer can definitely be influenced when seeing bankruptcy or credit counseling on your job application. Private employers are allowed to look at your credit standing and make their decision accordingly. Financial distress is not looked at very positively and could be considered a distraction to a new employee. However, a new employer’s view of credit counseling and bankruptcy may be different. To some it could be interpreted as credit counseling meaning you are now managing your finances, but bankruptcy indicating bad credit.
Landlords are also concerned about your credit rating and whether or not you will be able to pay the rent in a timely fashion. It would seem that a landlord would look more favorably on a bankruptcy because it indicates that you have no debt and would be able to afford the rent payment. A prospective tenant enrolled in credit counseling does not suffer on their credit score and this could be a positive thing. Perhaps the landlord would not notice that each account is under credit counseling management.
Securing a loan of any kind is where you will find greater difficulty. Lenders are likely to charge significantly higher interest rates or deny the loan altogether. It should take you 24-36 months to re-establish your credit after a bankruptcy if you start working on it right away. Though you may initially have to pay the higher interest rates, soon your positive credit rating will prevail. As your credit rating goes up, so can your demands for good rates on the loans you need.
On the other hand, if you are involved in an active credit counseling program, a loan of any kind will be near to impossible to find. Lenders will most definitely be aware that you were unable to handle your finances in the past and are still working on paying off your old debt. Re-building your credit is paramount to allow for any future loans to cover your needs.
If you are still nervous about the effects that you will see dependent upon your choice between bankruptcy or credit counseling, get in touch with one of the experienced southern California bankruptcy attorneys at Westgate Law as soon as possible so we can explain it in further detail.