If you’re thinking about filing for bankruptcy, timing can be very important. In fact, waiting to file bankruptcy could be a mistake. Bankruptcy provides a fresh start for debtors, and it offers protections against creditors and from falling further into debt. But these benefits set in only after you file for bankruptcy.
Until You File for Bankruptcy, Financial Stress Relief Can’t Happen
Many debtors delay filing for bankruptcy out of fear, lack of information, or perhaps feeling too proud. Some hope their finances will improve, although this wait-and-see approach often results in the opposite. Continued financial stress can cause no shortage of actual stress on the mind and body.
While the decision to file for bankruptcy should be carefully considered, the benefits and protections bankruptcy provides can take effect almost immediately. These benefits and protections largely derive from the automatic stay.
- The automatic stay is a powerful provision that protects bankruptcy filers from collection efforts and property repossessions, including foreclosure
- Taking effect immediately upon filing, the automatic stay says that collectors and creditors must stop all calls, letters, and other contact involving your debt
By stopping foreclosures, wage garnishments, and repossessions, debtors have a chance to reorganize their finances and form a bankruptcy repayment plan without fear of losing essential assets.
It’s not easy to break free from debt if your wages are being garnished or if you’re facing legal action resulting from your debt, like being sued by your credit card company. Here again, the automatic stay puts an end to wage garnishments and debt-related lawsuits.
Such financial stress relief can’t happen until you file for bankruptcy. In order to obtain bankruptcy protections, you’ll actually need to file for bankruptcy first. And while there are many reasons that people put off filing, delaying financial stress relief is not recommended.
Waiting Too Long Can Cause Ineligibility for Bankruptcy
By waiting to file for bankruptcy, your finances can change, which could affect your eligibility to file for bankruptcy. For example, if you begin selling off some of your assets or obtain new income, such as through seasonal work, you may no longer meet certain bankruptcy eligibility requirements.
This is especially true when filing for Chapter 7 bankruptcy. A common form of bankruptcy, Chapter 7 bankruptcy:
- Seeks to quickly liquidate debt not backed by assets, such as credit card debt and medical debt
- Can be completed quickly, as debt is typically discharged within four to six months.
Yet to qualify for Ohio Chapter 7 bankruptcy, debtors must pass a means test. The means test compares your income or your household income to the median state income. If your income is too high, you may be deemed ineligible for Chapter 7 bankruptcy. Further, obtaining additional money or assets, such as borrowing money from a friend, could complicate your bankruptcy filing ability.
Keep any potential future debts in mind when filing for bankruptcy as well. If your current debt and sources of debt will only grow, do not delay filing. But if you will be taking on new debt, consider that your bankruptcy repayments can apply only to existing debt.
Therefore it’s best to have a comprehensive view of debt before filing. Accumulating more debt, along with any unusual financial transactions, such as selling off assets or repaying favored creditors, could also raise red flags during the bankruptcy process.
If your income, assets, or available funds change while you’re waiting to file or considering filing for bankruptcy, your eligibility could change. While it’s important to weigh your options carefully, be mindful that your financial circumstances may change. Waiting too long could cause you to be ineligible for bankruptcy.
You Could Get Deeper into Debt Trying to Repay Creditors
Many debtors first try to avoid or put off bankruptcy. But as debts mount, your financial situation can worsen as you try to repay creditors. Debt accumulated through high-interest credit cards or personal loans only add to the financial burden. As debt mounts, even substantial payments may hardly make a dent in the principal amount owed.
Attempting to borrow your way out of debt often creates a cycle that only deepens your debt. In attempt to stave off bankruptcy, some debtors dip into assets and resources such as
- Home equity
- Retirement accounts
- Borrowing money from family or friends
By using assets that could be exempt in bankruptcy, debtors often risk more than necessary. When exempt assets are depleted, both the assets and the chance to preserve them through bankruptcy are forfeited.
By delaying filing for bankruptcy, you will end up paying more to your creditors, and some or all of that debt could by discharged in bankruptcy. Filing early could help maximize the amount of debt discharged while minimizing forfeited assets.
We Can Help You File for Bankruptcy
As described, in many cases it’s best to act expediently when filing for bankruptcy. The filing process can be long and quite complicated, however, and that’s why we are here to help. We’ll take a full view of your financial situation and help figure out the type of bankruptcy and timing of filing that’s best for you.
Our team of experienced Ohio bankruptcy attorneys can help you file for bankruptcy and get debt relief. Further, we will help you determine the timing of your filing and whether bankruptcy is your best option.
Call our legal team today and ask for your free consultation: 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati).
