It is very common for people to wait too long to file a bankruptcy case, even after consulting with a bankruptcy attorney.
It seems to be human nature to procrastinate, particularly when faced with doing something as unappealing as filing a bankruptcy case. Lately, however, I have seen an increase in people waiting too long to file.
It is understandable: Filing bankruptcy is not free and it’s not a fun path to take. People often need to save up money to file, and there may be other reasons to wait to file. People also like to be hopeful that things are going to change and they won’t need to file. However, there can be consequences, sometimes dire, if you wait too long. I’ve had several such cases in the past few weeks.
One client had a consultation with me over a year ago, at which time I advised he should file a bankruptcy case, but should probably wait a couple of months to let more time go by since the last time charges were made on his credit cards (which is sometimes advisable to avoid possible objections). But eligibility to file bankruptcy, particularly chapter 7, depends on both your income for the 6 months prior to filing, as well as your current income when your case is filed.
So, this client who was more or less unemployed for over a year, received a job offer that paid a decent amount. He hadn’t started the job yet. One of his creditors finally filed a lawsuit and at that point he contacted me back about filing the Chapter 7 case. However, due to the new job, he no longer qualified for Chapter 7, and was looking at doing a substantial repayment plan in a Chapter 13 bankruptcy case instead. Now this, of course, is not a disaster, but it ended up costing him more in attorneys fees, plus about $30,000 in payments towards his credit cards,(which he could now afford, but if he had filed when I advised, he’d be able to save that money instead!
There are a lot more examples I could provide, but it is important to understand the consequences of waiting and be realistic in your assessment of those risks and to discuss them with your attorney. This, of course, assumes one has already had a consultation with an attorney. I could write a whole separate article for people who wait too long to even seek an initial consultation about their financial situation!
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