Are you thinking about filing for bankruptcy, wondering if it’s the right choice? Do you feel like having a bankruptcy on your record will be like a blemish that hinders your ability to function in the world?
Most people have this concern because bankruptcies will stay on your credit report for seven years. That’s a long time. If you need to get a line of credit, it’s going to be much harder, if not impossible. However, despite this, bankruptcy isn’t the end of the world, and it doesn’t have to ruin your life.
In fact, when you hire a trusted bankruptcy attorney, they’ll explain exactly how you’ll be affected based on the details of your case.
You can live without credit
Despite what some people believe, it’s not actually hard to live without credit. You just have to restructure your lifestyle in a manner that doesn’t require living on debt. For example, you’ll need to start living within your means, which requires living based on your actual income and not the amount of credit you can access.
It will probably be a big change, but it’s worth doing because the last thing you want is to rack up more debt after you’ve had a bankruptcy. If you do manage to get approved for a line of credit after a few years, you can expect to pay a premium in interest.
You don’t need to buy a home
You need credit to get a mortgage, but you don’t actually need to buy a home. You can find a perfectly suitable house to rent just as easily, and you’ll actually save money because renting is cheaper than buying in the long run.
You might think it’s cheaper to have a mortgage because the average monthly mortgage is just over $1,000 and rents can be upwards of $3,000+. However, when you factor in all the extra costs associated with owning a home (repairs, maintenance, property taxes, fees, mortgage insurance, HOA fees, general insurance, and more), you’re going to spend more. Just getting a roof replaced at the end of its lifespan can cost $20,000 or more.
If you do decide you want to buy a home, you can save up cash for a 20% down payment and find a mortgage company that uses manual underwriting, also known as “no credit score lending.” Just be sure you don’t take on this type of debt until you’re completely debt-free.
You don’t need a new car
While many people have made it a habit to lease a new car every two years, or take out an auto loan to buy a new car, that’s not necessary, either. There are plenty of used cars available at a fraction of the cost of a new or leased car.
According to Bankrate, the average car payment is $729 for a new car and $528 for a used car. Most loans last for 6 years, which is 72 months. The good news is you don’t actually need to buy a car that requires payments. You can buy a perfectly good used car in cash for a one-time payment of between $1,500 and $5,000. It’s not going to be shiny and new with all the features and options, but you really don’t need all of that.
You don’t need credit cards
When credit cards were first created, they promised to make life easier for people, and they have lived up to this promise. It’s much easier to get what you need right away with credit than it is to save up over time and do without while you wait. Credit cards made it possible for people to buy high priced items and make small, monthly payments. This made a variety of goods and services available to people who would have never been able to get them.
The downside is that credit cards get you into the habit of feeling like you can buy anything you want, anytime. If this got you into debt in the first place, you’ll want to avoid credit cards for a while. At least until you get a handle on your finances and money management. Using credit isn’t bad when it’s used in moderation.
A credit score doesn’t determine your life quality
There are many reasons bankruptcy isn’t the end of the world, but the biggest reason is that your credit score doesn’t dictate the quality of your life. If you have a poor credit score for a while – even a decade – because you took care of your debt, it’s not a big deal. It happens to millions of people. You don’t need credit to live in this world, and while a credit score is nice to have, you don’t need it to live a meaningful life.