No matter how precarious their financial situation, almost every client I meet thinks bankruptcy will ruin their credit score.
Not only ruin it, but damage it for all time, precluding normal life after bankruptcy.
Some resolve to stagger along, burdened with their debt and the fear of escaping debt.
So, my encounter with a financial columnist was on point.
Liz Weston, L.A. Times financial writer, led a room full of bankruptcy attorneys through the impact of various life events on one’s credit score.
She recounted how, after meeting some debtors as she worked on stories, she no longer saw debtors as deadbeats.
She saw the challenges in their lives and the soundness of electing bankruptcy. Her candor about the change in her world view was refreshing.
Having written a book on credit scoring, she naturally was caught up in the interface with bankruptcy.
But as one who is frustrated by the fixation of those drowning in debt on their credit score, I wanted to stand up and shout:
Ruin your credit score, not your life!
The financial media sounds a drum beat that one’s life and worth is wrapped up in that credit score. All the while, that score is something we don’t fully understand and is based on credit reports which are notoriously inaccurate.
Life will end, we’re told, if our credit score declines.
That fear keeps American consumers struggling to pay debt that they can never repay, in this life or the next. In order to preserve their credit score, they appear resigned to a lifetime of minimum payments rather than a fresh start in bankruptcy
As Liz pointed out, the credit score is dynamic: it is constantly changing, and heals over time.
My call is to fix your balance sheet.
- Get rid of dischargeable debts.
- Save for retirement.
- Live beneath your means.
- Have some reserves.
Don’t walk the financial tightrope.
Image courtesy of terwilliger911,? pursuant to a Creative Commons license.