Adversity is a part of life. How we respond to adversity is a choice. When asked about financial adversity, Robert Kiyosaki, the bestselling author of Rich Dad Poor Dad, said, “Sometimes you win and sometimes you learn.” Sage advice. In 2015 the Federal Reserve Bank of New York released a report entitled “Insolvency After the 2005 Bankruptcy Reform Act,” which sheds light on the choices a person should make when dealing with 
financial adversity. The report studied data from 1999 to 2011 and compared the credit scores for insolvent borrowers that file bankruptcy to the scores of those that do not. The Federal Reserve Bank concluded:
The individuals who go bankrupt experience a sharp boost in their credit score after bankruptcy, whereas the recovery in credit score is much lower for individuals who do not go bankrupt.
The findings refer only to those borrowers considered insolvent. The definition of insolvent used by the study is individuals with accounts that are 120 or more days late or charged off. [Note: the term “charge off” or “charged off” is often misunderstood to mean the lender has forgiven the debt but usually the debt has been sold to a collection agency.] At this point, you might be asking, “Is that true?” The conclusion of the Federal Reserve Bank of New York is true and is supported by my experience over the years. To understand why, you need to realize that good credit is a history of paying bills on time. If you are in over your head in bills, and you are not able to pay even the minimum payments, then your credit will go bad and remain bad until you are able to resolve the debts. Bankruptcy clears debts and allows you to begin building good credit quickly. For those that do not file bankruptcy their credit can remain bad for many years.
At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy. If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free in-office consultation. We have offices in Walnut Creek, Antioch, and Hercules.