What could happen to my finances if I put off filing for bankruptcy?
Filing for bankruptcy is a major decision, and understandably it is one that many people approach with trepidation. Fear over the stigma associated with bankruptcy or its possible repercussions can lead many potential filers to put off declaring bankruptcy. A recent report from the Notre Dame Law Review found that putting off filing for bankruptcy when doing so is in your best interests can damage your finances even further. Our Atlanta consumer bankruptcy lawyers discuss why waiting to file for bankruptcy can harm your finances and when you should consider declaring bankruptcy below.
“Life in the Sweatbox”
A recent study published in the Notre Dame Law Review called “Life in the Sweatbox” examined data from the Consumer Bankruptcy Project. Data was gathered from over 3,000 bankruptcy cases during a three-year period between 2013 and 2016, along with survey information from a third of the filers.
The report found that among the filers surveyed, over 66 percent had been struggling financially for over two years or more. About a third waited in the “sweatbox,” or in a state of financial depletion, for five years or more. According to the survey, the longer people waited to file for bankruptcy, the worse their overall financial situation became. Long term strugglers were left with half of the assets as other debtors, while the debt to income ratio was far higher among long strugglers.
What the study is ultimately revealing is that when you reach a point of serious financial struggle, delaying filing for bankruptcy will usually simply result in worsening of your situation. As you wait to file, your funds are depleted in attempts to payback creditors. You may be forced to sell off assets or have them seized in collection judgments. Waiting can cause you to fall even more into a state of financial disrepair.
When to Consider Filing for Bankruptcy
Knowing the consequences of waiting too long, you should start to evaluate whether bankruptcy is in your best interests when you reach the point that your debts comprise more than 40 percent of your income. If you are using loans and credit card debt to pay down other debt, you are likely in a financial down spiral. If you feel your finances are out of control, contact a bankruptcy attorney for an evaluation as to whether filing for bankruptcy is right for you.