Medical emergency is the most common cause of financial trauma
Last year, there were 1,107,699 bankruptcy filings in the United States.
Job loss is the second most common cause. As of the end of 2013, over 10 Million people were unemployed in the United States.
Source: Bureau of Labor Statistics
Credit scores are widely used for loans, insurance and employment applications.
Recovering from financial trauma takes time and effort – but it’s possible.
Step one – Communicate with your creditors
As long as it’s possible to continue to make payments, creditors are usually willing to renegotiate loans and maintain a constructive relationship with you.
Step two – Restructure your finances
Through debt consolidation, refinance of real property, loan or mortgage modification, debts can be restructured within a payment plan and paid off at a pace you can afford.
Step three – Stop all payments
What if you’ve lost your income, been unemployed for an extended period or become disabled? What if you’re unable to make payments, unable to qualify for loan modification or other creditor accommodation?
Bankruptcy is a legal means of wiping your debt while possibly keeping your home or other assets. Your debts can be discharged on the completion of bankruptcy.
Bankruptcy is not the end – it’s a new beginning.
Bankruptcy can have the unexpected effect of improving your credit score. Even after financial difficulty, there are many steps you can take to improve it.
Although some kinds of debt such as tax liabilities and student loans can’t be wiped completely in bankruptcy, terms can be modified and accommodations made with creditors in a manner consistent with your new circumstances. Even if you’ve become disabled, financial recovery is possible by obtaining disability assistance and restructuring your finances.