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Is January 1 the best time to wipe my financial slate clean?

Your in-laws have all gone home. The wrapping paper and bows have all been picked up and thrown away. Your wife has even started taking down the ornaments and carefully packing away the red and green decorations.

Christmas is over, and you have scanned your December credit card statement online. You do not regret giving your family the best Christmas you could, but it is just one more bill you cannot pay right now. It is just one more headache added to the growing list.

You may have already considered taking out a personal loan, a second mortgage on the house or discussing your situation with a bankruptcy attorney. You want a fresh financial start, but bankruptcy is a big decision. The truth is you are hesitant, which is why you have not picked up the phone and called.

With the New Year approaching, is now the right time to file for bankruptcy? When is the best time to file?

Worries about paying the bills, harassing creditor calls and delinquency notices are not something you share with your neighbors. Debt is a personal matter, and so is the answer to the questions above. "When" is an extremely personal decision that depends on your individual financial circumstances.

January may be the right time for you to file. It may be the necessary time to file. It may be an okay time to file. It could even be the worst time for you to file. The only way you can know is to talk to an attorney who can look at your individual debt situation. Listed below are only three considerations of the many you and your attorney may discuss:

  1. Are you treading water or is your head already under? Timing often depends on whether you need to start over or just need time to catch up. If you are deciding which bills to pay, you might just need a little restructuring; this might include working with creditors for a modification outside of bankruptcy or restructuring you debt under Chapter 13.
  2. Will you receive a tax refund this year? If you are in bankruptcy, your tax refund is part of your bankruptcy estate. The trustee will likely use the funds to pay creditor claims. Your attorney can help you address this issue, like adjusting your withholding or include it in your exemptions.
  3. Have you made any large purchases recently? The bankruptcy court will look at your recent spending habits. If you made a big purchase, like a car, or several small purchases that add up, creditors can ask the court to exclude them from the bankruptcy estate. This means that you would still be liable for the full amount.

Thinking about timing often raises more questions about bankruptcy than you initially thought about. That is understandable and expected, which is why some attorneys offer free initial consultations. The benefit of this is that you can discuss your options on a personal level with an experienced attorney without incurring additional costs you can't handle right now.

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