For those dealing with financial problems, the need to find a solution is often immediate. You may be behind on bills or payments and at risk of losing your car or house, or you may have lost your job and you’re worried about making your mortgage payments on time. No matter what happened, one thing is for certain: bankruptcy is on the table, and you need to know what to do next.
If this sounds like you, we’re here to help. Today, we’re going to discuss what is the best time to file for bankruptcy depending on your circumstances and needs. Let’s go over your next steps.
Why are you considering filing for bankruptcy?
Before filing for bankruptcy, take some time to think about why you’re filing. Depending on the answer, it may impact when you choose to file. Let’s use health problems as an example. If you don’t have insurance and recently underwent a costly medical procedure that you cannot repay, your first instinct may be to file for bankruptcy. Think about other possibilities though – are you going to have further medical issues in the near future? Are you going to get insurance, or will you continue to be uninsured for future medical issues? In this circumstance, it may be better to wait it out.
Take time to evaluate why you’re filing for bankruptcy. If possible, talk with a family member or someone you trust to go over the pros and cons of the decision. When you feel yourself getting closer to a decision, talk to a bankruptcy attorney about all of the factors going into your decision to file bankruptcy. They’ll be able to help you decide which choice is best for you and your future.
What should you keep in mind?
Before filing, there are several pieces of information you’ll need to consider:
- Are you getting rid of assets? If you’re giving away money or property in exchange for nothing before filing for bankruptcy, you will involve the person who received the money or property in your bankruptcy case as the person will have to repay or give back property to the bankruptcy court. It could also be an illegal act – any act of hiding or offloading assets before filing for bankruptcy can be perceived as fraud. Before getting rid of anything, talk to your lawyer and make sure you aren’t committing fraud.
- Have you made any luxury purchases? If you’ve put luxury purchases on credit cards prior to filing for bankruptcy, you should be aware that those purchases may not be discharged. Bankruptcy is intended to help you out financially, not to allow luxury purchases to go unpaid. If you buy an expensive ring, for example, right before filing, it’s incredibly unlikely that it will be discharged with your debts. You can still pay for necessary items like food and bills with credit cards, as these are seen as essential. That being said – if you’re making luxury purchases, it may be necessary to wait to file.
- Do you absolutely need to file for bankruptcy? Keep in mind that bankruptcy is not a walk in the park. Though it is still overall positive for your finances if you cannot get out of debt, it’s not something that should be taken lightly. Before filing, consider talking to a credit counselor who can help you readjust your budget. You may need to get a second job or significantly change your spending habits, but you may be able to recover financially. You may also discuss debt payment with your creditors — if you agree to pay a certain lump sum, you might have a portion of your debt forgiven.
Not sure whether bankruptcy is right for you?
Contact Reynolds & Gold. We’ll help you discover what is best for your finances.