For those currently struggling under the weight of money problems, the old adage feels particularly salient: “a hundredfold of worry will not pay an ounce of debt.” Unfortunately, many of these people are afraid to declare bankruptcy because they are unsure about what it will mean for their future finances, credit score, and on a more personal level, what it might mean for them as people. There are a lot of emotions wrapped up in the decision to file for bankruptcy but knowing what to expect will do a lot to help mitigate those worries.
The truth is, too many people are currently suffering in collections, dealing with agencies that don’t have your well-being in mind. Instead, they ladle unsurmountable interest on top of the principal amount and chase after you for years, eventually turning your debt into a legal matter. At Rulon T. Burton & Associates, we want to empower you with the information you need to take matters into your own hands. If your debt must become an affair for the courts by filing bankruptcy, we want you to do it on your own terms, with both eyes open. In the meantime, we’ll be here for you every step of the way.
Filing Bankruptcy in Utah
As bankruptcy attorneys, we genuinely encourage everyone to get educated about their options and even to reevaluate their views on both chapter 13 and chapter 7 bankruptcy. The fact of the matter is that billions of dollars are being argued over and added upon in collections, whereas filing for bankruptcy can bring near-immediate relief. Of course, no one is expected to make such a big decision without knowing the consequences, and for many, the biggest question mark is how their credit will be affected by their filing.
What Happens to Your Credit?
There’s a pervading rumor that bankruptcy filings in Utah will completely cut you off from being able to create good credit, and that what you have been able to accomplish will effectively be wiped away. Both are inaccurate. From a credit standpoint, there are a few things to count on when declaring that you are unable to pay off your debts:
- Your bankruptcy enters the public record. This may sound terrifying, but it’s done in order to protect you and future employers, loan officers, and other business relations from undergoing a transaction that you aren’t prepared to meet. Depending on what type of bankruptcy you declare, your financial situation will be on your public file for seven years (Chapter 13 bankruptcy) or 10 years (Chapter 7 bankruptcy). Don’t worry though; there will not be any “town crier” situation wherein the courts make known to any irrelevant person your financial situation.
- Your credit will take a hit. This is inevitable, but again, not as devastating as you expect. Because credit is accrued by taking on debt voluntarily and then paying back what’s owed in a timely manner, reneging on that promised payment runs contrary to the nature of credit, and you will likely take a large hit and see your score decrease. This doesn’t mean, however, that all of your hard work is gone and that you’re starting at zero.
- Only certain types of credit cards and loans will be open to you. The great truth about bankruptcy is that the courts and the banks want you to be financially autonomous. Depending on which type you file﹘chapter 7 bankruptcy gives you a clean slate in exchange for the selling of your assets (as determined by the bank), while chapter 13 puts you on a payment plan﹘you will have the freedom to both work on paying down your debt and building up your credit at the same time. You will likely only be able to take out more protected loans like a secured credit card or CD, but these safeguards are to everyone’s benefits.
Once the time limit has run out on your public file and your paid debts are no longer reflected there, you will be free to build up your credit by more traditional means. Getting an experienced bankruptcy lawyer behind you will be a big help in getting you back on your feet faster, without losing more than is necessary for the fulfillment of your bankruptcy obligations.