Credit counseling can help get to bottom of what led to bankruptcy ...

Debt can come from a number of sources, but wherever it comes from it can be among the most stressful aspects of life. When debt causes one's credit score to spiral downward, things get more and more difficult and it can seem as if one is unable to get out of the hole one is in.

Sometimes unmanageable debt and poor credit is the result of poor financial habits. Overuse of credit cards, poor budgeting, lifestyles and addictions can all contribute to a downward financial spiral. When this is the case, bankruptcy and other credit repair solutions are only a temporary fix. Even when necessary, they will not solve to source of the problem in such cases.

In many other cases, though, factors outside one's control contribute to financial problems. In such cases, filing for bankruptcy or going through credit repair can help one get out of a tight situation.

Whatever the causes for poor credit, credit counseling is a valuable thing to pursue for those on the brink of financial ruin. Such programs can help address the sources of one's credit troubles. In filing for bankruptcy, one is required to go through credit counseling, but the effectiveness of this education largely depends on how seriously the debtor takes it.

One concern that people sometimes have about filing for bankruptcy is how it will affect their credit score. One of the perhaps surprising things about filing for bankruptcy protection, though, is that it may in many cases actually improve the filer's credit score.

One reason for this is that, for many filers, the state of financial distress that caused them to file for bankruptcy had already caused their credit score to suffer significantly. Late payments, high balances, and charged-off collection accounts all contribute to this. In some cases, filing for bankruptcy can actually boost one's credit score.

The bottom line here is that filing for bankruptcy can be a very wise decision in many cases, but it does not in and of itself address the problems that may have led to the financial disaster that prompted the filing. For this reason, it is wise to seek some type of extended credit counseling in conjunction with bankruptcy.

Source: Fox Business, "Out-of-Control Debt? Rein it in to Fix Credit," Steve Bucci, July 12, 2012

Source: http://www.tennesseebankruptcylawoffice.com/2012/08/credit-counseling-can-help-get-to-bottom-of-what-led-to-bankruptcy.shtml

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