Financial problems rarely occur over night. They can sneak up on you. At first, you may find that you are unable to save money each month. Paying the bills becomes stressful instead of annoying. Then the collection calls start coming. Eventually, your lender may file an action to foreclose on your home or garnish your wages.
Once you are in serious financial trouble, it can be very difficult to see that there is a way out. How bad must your financial situation become before you contact a bankruptcy attorney? The "right time" might be different for everyone, but you certainly do not have to wait until your situation seems hopeless to seek help.
A good rule to follow is to consult an attorney as soon as you feel as though you are losing control over your finances. Talking to a bankruptcy attorney does not mean that you must file for bankruptcy. Your attorney can provide you with a comprehensive understanding of your financial situation and give you advice and assistance concerning the best alternatives to bankruptcy.
When bankruptcy is the right option, you need to know that it is not the problem. Bankruptcy is the solution to a problem, and you can use it proactively not just reactively.
Consumers can file for personal bankruptcy under two chapters: Chapter 7 and Chapter 13. The type of bankruptcy you choose depends on many factors, including the assets you own, the amount and nature of your debt, whether you earn an income, your goals and, yes, timing.
While you should only rely on the advice of an experienced bankruptcy attorney based on your individual situation, you can ask yourself a few questions as you think about your options:
Chapter 7 could be beneficial if you can answer yes to any of the following questions:
- Do you have significant unsecured debt, such as credit card bills or medical expenses?
- Are you unemployed or do you earn less money than the median income in your area?
- Do you have back taxes that are more than 3 years old?
- Have you received notices from multiple creditors that they are suing you?
- Do you have significant debts without cosigners?
- Do you want to sell your home and get out of your mortgage?
- Is your home underwater?
- Do you want a quicker bankruptcy process?
Chapter 13 could be beneficial if you can answer yes to any of the following questions:
- Are you behind on your mortgage payments but want to keep the home?
- Do you have a second or third mortgage?
- Do you earn a good income but cannot afford your monthly payments?
- Is your income above the median range in your area?
- Do you have debts with cosigners?
- Do you just need some time or breathing room to get your finances together and repay creditors?
The most important thing to remember is that no situation is too bad. You can always make your financial life better, but you need to choose a lawyer with experience. Your bankruptcy attorney's knowledge of the law and the process does have an impact on the proceedings and the outcome.