When To File Bankruptcy

How Long Should I Try To Avoid Filing Bankruptcy?

Most people who come in for consultations with me will have actively tried to avoid filing bankruptcy for about 3 years; some more/some less. On one hand, it shows how hard people try to stay out of bankruptcy. On the other hand, they are often no better off, and often much worse off, than they were before.

Many people increase their total debt significantly as they “rob Peter to pay Paul”, just trying to keep up their minimum debt payments. During those years, they pay thousands of dollars of interest to their creditors and may have made little or no progress in payment of the overall debt. People will ignore health problems, fail to get proper dental care, and let their homes and cars go into disrepair. Others have used up their life savings, their home equity and/or their retirement funds to tread water, or move to the deeper end of the pool. Many people are diverted into debt management programs for several years without ever paying off their debt, or they might address some of their debts but not others. Unfortunately, many programs don’t consider whether or not you are able to do what they set up, or they might not be able to work with all your creditors. A good program will take into account a payment plan AND your budget.

Early intervention may be the key to getting control over your life. A consultation with a consumer bankruptcy attorney early on should be one of the first, not last, steps you take when you see yourself in financial distress. Lawyers look for the best solution for you overall. Avoiding seeing a bankruptcy lawyer does not mean you are going to successfully avoid bankruptcy, and the earlier you see a bankruptcy lawyer, the more help they can provide.

The sooner you speak to an attorney, the more options you might have. Early intervention options may include a bankruptcy such as a Chapter 13 repayment plan, or they might recommend a non-bankruptcy alternative, such as working with a really good credit counseling agency. At some point, these alternate options may disappear, and Chapter 7 may be your only option. Yvonne Michaud Novak is a local attorney who works with individuals and small businesses who need help with their debt problems. As a federally designated debt relief agency her office helps people file for bankruptcy.