When individuals are considering filing for bankruptcy, they may place too much focus on the negative aspects of the process. Certainly, bankruptcy will have an effect on credit scores and other facets, but it can also prove to be beneficial for individuals with substantial debt. Some parties may be concerned that this debt relief option will hinder future attempts at obtaining loans, and students may be particularly concerned.
It is important for Tennessee residents to understand that a past bankruptcy filing should not be the cause for an individual not obtaining a student loan. There are various types of loans that could be suited for a person's situation, especially if that individual is looking to return to school. It should be understood, however, that loan approval is based on several factors, including credit score and repayment ability.
Though bankruptcy can have a negative impact on a credit score, parties can work toward raising that score by staying on top of their credit use after their bankruptcy process is complete. By refraining from falling back into an overwhelming debt situation, individuals are likely showing that they can now responsibly handle their finances, and that could be reflected by an increasing credit score. It is also important to note that interest rates on loans may be higher for individuals with lower credit scores.
If the fear of being unable to obtain a loan in the future is keeping an individual from exploring bankruptcy as a debt relief option, it may be helpful to understand that various aspects are considered for loan approval. Though credit scores are one of those aspects, scores can be improved over time for individuals who believe that their scores may hinder their chances for future loans. Bankruptcy information from local Tennessee resources may help concerned individuals determine whether it could be the right option for them.
Source: Fox Business, "Will a Bankruptcy Stop Me From Getting Student Loans?", Karin Price Mueller, Jan. 21, 2015