For most people, the idea of filing for bankruptcy is accompanied with negative feelings that are worsened by the misconceptions about the process of bankruptcy. Speaking to people reveals that it's not uncommon to discover that a person has been going through financial struggles since a long period of time which may be months or even years before they start discussing their situation with attorneys. People fear filing for bankruptcy without knowing that delaying it can make filing for bankruptcy even more expensive. Bankruptcy is considered a sign of failure or a collapse of someone's personal finances. These misconceptions render people unable to file for bankruptcy which in fact can be their best option. Although, filing for bankruptcy can have some costs immediately, it still is a chance for you to get rid of your debts and start fresh.
There are some risks associated with delaying bankruptcy that engrave a debtor's situation even more. These include the following:
The quality of your life may deteriorate
The pressure of repaying debts can affect your standard of living and personal health. Some debtors save money by forgoing necessary expenses, such as food and medical treatment. The stress can be harmful to a person’s mental and physical health. Bankruptcy protects the money you need to pay for basic living expenses and gives an eventual resolution to your stress.
Your creditor may file a lawsuit against you
You may be content to slowly repay your debts, but your creditors may not display the same patience. By filing a lawsuit against you, your creditor is seeking immediate compensation for the debts you owe through mechanisms such as attaching your bank accounts. You still have time to file for bankruptcy, but the lawsuit puts you on the defensive and requires you to act quickly.
Filing for bankruptcy may save some of your property from being sold
Filing for bankruptcy allows you to protect key properties through the various exemptions available. Your home, vehicle and other properties of a certain value can all be exempt from your creditors. However, people who avoid bankruptcy may choose to sell important properties to help with repayment. If they eventually file for bankruptcy, it will be too late to exempt and save properties that have already been sold.
There is a chance that your debt may raise even more
Some people try to avoid bankruptcy because they believe they can get by with their own repayment plan. However, keeping up with debt payments can be difficult if you lack the financial resources. Making minimum payments may prevent immediate default, but will allow interest rates to accumulate on the debts. If a Chapter 13 bankruptcy is filed, you will be facing a larger debt that may have to be paid in full, depending on your repayment plan.
Why does waiting to file bankruptcy cost more?
Waiting to life for bankruptcy does not specifically mean that the fee for filing bankruptcy increases with time. The fee for filing bankruptcy is determined by government household income standards as well as by the money received from assets that the creditors expect the trustee would collect.
What are the costs that increase?
The increased costs are those associated with the loss of money and quality of life that are experienced by many debtors from trying to tackle an insuperable debt load with no particular plan other than to pay-it-off.
A lot of people who are struggling to get rid of their debts by filing for bankruptcy could mean any of the following:
- Money wasted in the form of interest because you were making minimum payments with no effect on the principal balance
- Selling off or cashing in assets to keep up with credit card payments when these assets are protected in a bankruptcy or could be preserved through a consumer proposal
- Consolidating credit cards to a single loan with the same unmanageable interest rate thereby postponing the inevitable, all the while paying more in interest
- Conversations with creditors on the phone explaining why payments have been missed or when the next payment will be made
- Threats of litigation on behalf of creditors and perhaps even experiencing loss of wages through wage garnishment
- Stressful and sleepless nights
It is these costs that people mention when they say they wish they had contacted an attorney sooner.
There is also the opportunity cost of postponing your ability to begin to rebuild your finances. It is true that many people are afraid to file bankruptcy because it will appear on their credit report for 6 to 7 years after filing. However, if bankruptcy is the right answer for your debt troubles, then the sooner you file, the sooner you can begin to rebuild. Most first time bankrupts complete their bankruptcy in nine months. After a person's bankruptcy is completely dealt with and is finished, the debts and all payments they made on a monthly basis just go away. All that money you were paying in interest can now go into savings. In addition, you can apply for a secured credit card after filing for bankruptcy to use for convenience and to re-establish a new credit history. Stating all of this simply, the financial life of a previous debtor starts all over again. This is also because your bankruptcy is removed from your credit card report.
Many people delay as long as possible in order to continue to maintain access to their credit cards. Yet what they are often doing is using new credit on one credit card to be able to have enough money to keep their other credit card afloat.
If your debts have become too much to handle and you know you need to do something to get rid of them, set up a free consultation a local trustee sooner rather than later. If you’re having difficulty meeting your monthly financial obligations, simply having a conversation with a bankruptcy attorney will give you the tools you need to make the best decision for yourself and your family.
Canago Park Bankruptcy Attorney have dedicated their lives to the craft and stand by your side throughout the entire case, should you have any questions or concerns about the process.