SALT LAKE CITY (ABC 4 News) – Utah bankruptcy filings are up by 31 percent from a year ago. The number of Utahns seeking debt relief has grown to 8,942 in the first six months of 2010, as compared with 8,942 in the same period of 2009. Experts say the continued housing slump, unemployment rate, and years of consumer debt are to blame, but they also say too many people are acting too fast when seeking protection for Chapter 7 and Chapter 13.
Preston Cochrane, from non-profit, AAA Fair Credit Counseling says “bankruptcy is not always what people think it is, it’s not an easy way out.”
Holly Horton learned that from experience when she filed for Chapter 13 five years ago. She filed for bankruptcy after drought and medical troubles turned the dream of owning a ranch into dust. “I didn’t want to lose it. You don’t want to lose everything you have worked on so hard.” So, she fought to keep afloat. “I kept telling myself that it would get better but it wasn’t and I wish I had woken up earlier.”
Cochrane says many people make that mistake. “A lot of times it’s too late in the game, and so from a consumer perspective if they can see when that time is, and identify the writing on the wall and make those changes in behavior and spending patterns, then their likelihood of being able to avoid bankruptcy is much greater.”
Horton says the months leading up to her decision were an emotional rollercoaster full of stress from a constant barrage of phone calls from debt collectors and bills that continuously arrived in the mail.” It was so stressful that I was actually becoming physically ill.”
Cochrane says filing for bankruptcy is often an emotional decision. “The consequences of bankruptcy are often ignored when creditors are calling. Obviously, that is the first thing you want to stop those calls, you want to stop those letters from coming in.” But he says the consequences are long lasting and can be devastating. “The consequences you are going to see on your credit reports, on your insurance, with you employers, the military especially has a hard time with bankruptcy on your record.”
Horton has now paid back everything owed to clear her bankruptcy, it took five years and eighty percent of her salary. She moved back in with her parents to make it possible. She says it will still be another two years before it is removed from her credit record. “Every time somebody looks up my credit for a car loan or anything else, there it is in big, bold letters.”
She and Cochrane recommend people explore all other options before filing for debt relief. AAA Fair Credit counsels clients to create a budget, see what your income to debt ratio is. Adjust spending habits. Look for assets that you may have that you are willing to sell. Contact friends and family and if you need help, get credit counseling. To find a credit counselor look for someone who is non-profit, and has a good rating with the Better Business Bureau and the department of Consumer Protection.
