Many people wait far too long to file bankruptcy cases they honestly need to file. Experts call this time “the sweatbox.“

We’ve even posted all the signs you might need to file here on our blog. You don’t always have to wait for the repossessions or the foreclosures to start happening. You don’t have to wait for the lawsuits. 

Sometimes, it’s just enough to know that you’re in financial distress. 

Yet you may not know why it’s so important to go ahead and consider bankruptcy when the time is right. 

The sweatbox makes you drain assets you could have kept.

If you don’t know that your retirement accounts should be safe from a bankruptcy proceeding then it might be easy to let creditors push you into draining yours. They may even try to push you into getting HELOC or other ill-advised loans just so you can pay them.

In reality, the sooner you stop trying to pay your way into the black hole, the better. You won’t get any benefit out of paying those old collection accounts. The original company you’ve done business with has either made three times the worth of the item you bought on interest, has written the debt off as a tax write off, or both. You don’t have any moral obligations to them. 

It’s better for your physical and mental health.

Studies show that being deep in debt can lead to depression, anxiety, and even physical problems. These issues then sap away your resources. You won’t have as much energy to help you navigate the problem.

Bankruptcy doesn’t just give you a fresh financial start. It can lift a weight off your shoulders, too.

It will fix your credit.

It’s really counter-intuitive, but bankruptcy can help you improve your credit score, sometimes by as much as 80 points.

It has a lot to do with the way the credit scoring algorithm works. Bankruptcy closes and wipes all the dozens of past due, delinquent, and charge-off accounts currently listed on your credit report. Your DTI ratio goes down.

While bankruptcy itself is a negative public record, it doesn’t drag your score down nearly as much as all those other derogatory accounts did. In two years, with a little strategy, you may even have yourself back up to an 800 credit score once more. You’ll be astounded how quickly you’ll be able to get access to the accounts you need to rebuild your credit once you’ve received your discharge.

Need help? 

Still not sure whether bankruptcy is the right move for you? Contact us to schedule a free consultation. We’ll take a candid look at your entire financial situation and help you make an informed decision.

See also:

How Will Bankruptcy Impact Your New York Retirement Account? 

7 Signs You Should File Bankruptcy

Are You Waiting Too Long to File Your Orange County Bankruptcy?