According to a 2015 Federal Reserve Bank of New York report, people who file bankruptcy fare much better than those who avoid doing that. Lets look at some of the ways this happens.

People who filed bankruptcy had access to more new lines of credit than those who limped along in a poor financial state.

People who filed bankruptcy saw an improvement in their credit scores over time, compared to those who continued to struggle with their debts. People who file bankruptcy experience a boost in their credit score after bankruptcy, but the recovery of credit score is much lower for individuals who do not file bankruptcy.

Significant retirement income is lost by people who avoid filing bankruptcy. Why? Because of the money used to pay back debt instead of (after bankruptcy) investing it in retirement funds.

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