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Life after Bankruptcy: A Financial Mulligan!

James Doan - Tuesday, August 16, 2011

By Gregory J. Doan, Esq

There has never been a better time for a real financial “do-over.” We call it Bankruptcy.

Whether you consider restructuring your debt through a Chapter 13, or eliminating all of your unsecured debt with a Chapter 7, you are creating an opportunity to start over again fresh, without the weight of toxic debt holding you down.

Some people are hesitant to consider bankruptcy because they fear it will hurt their future credit. Reality is that bankruptcy can help improve your credit score and do it more quickly than any debt consolidation program.  Many of our clients are surprised to hear that within weeks of their discharge, banks begin inundating them with credit card offers while local auto dealers craft special offers, specifically designed to help them purchase new vehicles. Because bankruptcy can be filed only once every 8 years, bankruptcy clients are seen as low risk borrowers.

After bankruptcy, being prudent with credit opportunities can enhance anyone’s credit score. There are many cases of individuals raising their FICO to well over 700 in less than two years. Some clients are even able to purchase a new home within two years of their discharge.  Ironically, two years from now is when most pundits believe the realty market will bottom-out, yielding the best purchase opportunities.

Putting this in perspective, sales of bank-owned (REO) properties recently hit 34.5% of the market, resulting in a national price drop of 5 percent year-over-year. National home prices have fallen 11.5 percent in the past nine months, a rate not seen since 2008. Add short sales, where the bank allows the borrower to sell for less than the value of the mortgage, and prices have nowhere to go but down.

The bottom line is that bankruptcy is a tool, designed and approved by the Federal Government to help citizens improve their financial health. Each year in the recent past has seen more than 1.5 million people get a chance at starting over. Maybe it’s time for you to consider taking a Mulligan?


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