Bankruptcy Can Cure Financial Cancer
Financial problems are a lot like Cancer: If you catch them early, they are usually easy to fix with a high likelihood of full recovery.
The longer you let them go, the harder it is to fix and the less likely it is for a full recovery.
Bankruptcy is a powerful tool that can cure financial cancers.
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 bankruptcy or to at least consider filing bankruptcy.
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.
Don’t Wait Until You Get Sued To Explore Bankruptcy Options
One client had a consultation with me over a year ago, at which time I advised he should file a bankruptcy case.
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, now 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, over a year later, 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.
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!
Don’t Wait Until Your Wages Are Garnished To Learn Bankruptcy Options
Another story, which is very common, is a potential client walked into my office telling me how a creditor is “suddenly” garnishing his wages and as a result he can’t meet his normal living expenses anymore.
There’s something else we learned he now can’t afford: a Bankruptcy Attorney.
He has no money saved up, and what little disposable income he had is now going to pay the garnishing creditor.
We’re working to find a way to get the garnishment reduced, but otherwise he may be in a position where he’ll have to file bankruptcy without an attorney, or with a less qualified attorney.[See my article on the recent report of the bankruptcy courts on the low success rate of cases filed without bankruptcy attorneys.]
How did this happen? Why didn’t he get advanced notice?
Well, he probably did.
The problem is that he moved several times in the past year or so, and had not informed his creditors (also very common).
Creditors are not required to look for you indefinitely.
If they can’t find you, they can do “substitute service” by simply publishing notice of the lawsuit in a local newspaper.
Once that’s done and you don’t respond, they get their judgment against you by default and then they can garnish wages and take other collection efforts pursuant to laws of your state.
In California this also includes putting liens against property and seizing bank accounts.
Talk to a Bankruptcy Attorney Today
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 a competent, experienced bankruptcy attorney.
Don’t like attorneys? Then at least discuss it with your accountant/CPA and get their input.
The worst thing that can happen is you take up 30-60 minutes of your time to learn something.
Failure to do so can leave you in a situation where you can’t even afford to dig yourself out.
Photo courtesy of hang_in_there