which is worse on credit bankruptcy or repossession?

UPDATED: Jul 6, 2009

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which is worse on credit bankruptcy or repossession?

Asked on July 6, 2009 under Bankruptcy Law, Virginia


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 13 years ago | Contributor

Both are very bad, but bankruptcy would probably be worse. (It's hard to say exactly--credit rating agencies jealously guard their rating formulas.) Bankruptcy represents a global wiping out of debts; while it's a legal remedy available to you, it essentially represents default on everything. Repossession of one item--say, a car--looks bad, but if you've otherwise honored you obligations and paid in full, it's a single strike against you, so to speak, rather than an across-the-board clearing of debt.

Of course, if you're likely to default on more than one obligation, you're credit is likely to be very bad anyway. In that case, it may be to your advantage to declare bankruptcy and get a clean slate. And more generally, while it's important to manage your credit rating, don't let that be the driving decision--take the course of action that overall is best for you, considering your total liabilities, assets, income stream, etc.

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