We live in a time when an individual’s financial history carries a great deal of weight. Making uninformed decisions now can prove costly down the road. While making such decisions, mingled with unfavorable circumstances can ultimately lead to financial chaos, there are steps one can take to repair the damaged road leading to the future.
The Role of Bankruptcy
There is a lot of undue negativity surrounding the word ‘Bankruptcy.’ As Utah bankruptcy attorneys who have helped many people over the years, we want to alter the stigma. For many individuals and families, chapter 13 or chapter 7 bankruptcy is the best way to continue forward. It lends an opportunity, in many ways, to start over.
That being said, bankruptcy does not mean a person is out of the woods. Whether before or after a bankruptcy situation, an individual struggling with their finances needs to be educated on the impact of their decisions. The collective impact of such financial decisions is largely reflected by a three-digit number known as the credit score.
A Good Credit Score Takes Commitment
While a poor credit score may not translate directly to foreclosure or delinquency, it literally takes money out of one’s pocket. Poor credit scores mean higher interest rates on loans, denial of loans and lines of credit when needed, and a stain on your financial reputation. Those with a credit score higher than 670 are considered to have good credit; anything lower can be the cause of headache. Earning and maintaining a good credit score is a good way to ensure stable financial health.
What to Be Aware Of
Whether an individual currently has no existing credit, damaged credit, or is working their way back to health after bankruptcy, it is important to do the right things. Failure to do the right things gives credit bureaus no choice but to lower a score. Below are some things everyone should work hard to avoid.
Charge-offs
A charge-off is essentially a declaration by a creditor (the party to whom you owe money) that delinquent debts are unlikely to be collected. This usually occurs at least six months after a failure to pay.
Collections
Collections are delinquent debts that are sold from the original creditor to an outside collection agency. At times, these debts are relentlessly pursued.
Foreclosures
Foreclosures occur when an individual forfeits the rights to their property due to a failure to make mortgage payments.
Judgments
Judgments are debts owed through the court.
Late Payments
Late payments are made 30 days or more after the initial payment due date.
Liens
Tax liens are a claim against an individual’s assets by the government when they have failed to pay their taxes.
Takeaways
When all is said and done, there are two main things to remember:
- Bankruptcy is not a punishment for financial mistakes; it’s a path towards improvement.
- Strive to pay all bills on time no matter your situation. That alone will prevent a number of problems. Once that is not possible, seek help.
At Rulon T. Burton & Associates, we help people navigate through the turbulent waters of debt and financial difficulty. Bankruptcy is the right option for many situations, but legal expertise is often required to make those determinations. If you have any questions or concerns regarding your current financial situation, please contact us today.