According to a law review posted this year, the longer an individual delays in filing bankruptcy the more difficult it gets. This not only damages the person financially, but it affects his or her well-being or health. Once debt becomes unmanageable and assets start depleting, lawsuits for debt collection start piling up and people become unable to afford basic necessities. For this reason, it is important to understand the right time to file for bakruptcy.
A recent report from Notre Dame Law Review says that waiting and suffering in debt has become a common scenario within America. It also shows that the number of people who waited for five years or more before filing bankruptcy has doubled compared to last year. Research shows that if you wait, your financial situation will get worse rather than improving.
So, when should you consider filing for bankruptcy? CEO of GreenPath, Kristen Holt, says that one should call the counseling agency as soon as stress starts building up. One can consider the following factors to determine the right time:
- When debts exceed 40% of income, it is a clear indication that your debts are higher than what you can pay off;
- When you start paying debts with other debts, it becomes difficult to recover in such situations;
- When most of your debts are unsecured debts such as credit cards, medical bills, etc., such debts can be cleared in bankruptcy; and
- Depriving yourself of basic necessities such as medical attention and food.
While most of us think that filing for bankruptcy is the end of the world, it is not. Usually, your credit score improves in months, not years. A report published in 2014 by Federal Reserve Bank of Philadelphia stated that for people who filed bankruptcy in Chapter 7, their credit score went up by 80 points on an average by the time the cases were cleared.
How do I File for Bankruptcy?
Filing for legal bankruptcy can be done voluntarily with the help of a bankruptcy lawyer. In many cases, people with file under either Chapter 7 bankruptcy or Chapter 13 bankruptcy. Filing for Chapter 7 bankruptcy is popularly known as “liquidation.” Chapter 7, or liquidation, requires a debtor to give up some of their personal assets (i.e., cars, jewelry, and art) up to a certain amount, so the assets can then be sold to cover the debt. Alternatively, filing for Chapter 13 bankruptcy requires a debtor to apply for a repayment plan to pay off all or parts of their debt using their regular income. This is called “debt adjustment.”
Contact a Bankruptcy Lawyer
At Newland & Newland, LLP, our goal is to help people who can not pay their debts and to make filing bankruptcy as smooth as possible for you for the most reasonable price. We are compassionate, professional, and knowledgeable. If you are struggling with overwhelming debt, can contact the bankruptcy lawyers at Newland & Newland, LLP. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Kim Gorga)