This question comes up a lot: “Won’t bankruptcy ruin my credit?”
The answer depends on what you mean by “ruin.” If you’re contemplating bankruptcy your credit is probably already bad. Late payments, charged off accounts, lawsuits, judgments, foreclosures, garnishments — all of these negatively impact your credit. In fact a study by the Federal Reserve of New York found that people who file bankruptcy almost immediately have better credit than those who continue to wallow in insolvency.
The reason this is so is that bankruptcy, especially Chapter 7, immediately wipes out all of those other things. Garnishments stop, foreclosures stop, judgments can’t be collected or lawsuits continued. Sometimes filing bankruptcy is the most responsible thing you can do.