Bankruptcy is always a though decision to make. Most debtors resort to bankruptcy as a last option to resolve their financial situation. While it takes time for this realization to sink in, 3 factors that affect most whether to file bankruptcy are, income, assets and timing.
Income: A debtor’s income can be a factor in limiting the debtor’s options on what chapter he or she may file under. Too much income may exclude the debtor from qualifying for chapter 7 bankruptcy under the means test. However debtor’s may be able to overcome the means test if they have sufficiently high monthly contractual obligations such as mortgage, car payments. Debtors can also use other expenses such as childcare, healthcare expenses to still qualify under chapter 7 bankruptcy. Otherwise, they can usually file chapter 13.
Assets: The law allows a certain amount of exemptions that are protected under bankruptcy. Funds in excess of the exemptions are not protected and will be liquidated to pay your creditors. Too much assets, under chapter 7, may prevent a debtor from filing bankruptcy when they are unwilling to have certain assets liquidated. Alternatively, debtors can file chapter 13 and pay back into the plan the value of these assets within reason.
Timing: Like everything else in life, timing is everything. If the debtor’s wages are being garnished, then they do not have much of a choice, the time has been decided for them by the creditors. Leaving the decision to file bankruptcy for the last minute is the most common mistake debtors make. But with little foresight, a debtor’s options for a fresh start are greatly enhanced. Proper timing can help debtors determine their income level and accordingly qualify for chapter 7 when they would have been required to file under chapter 13 otherwise. Proper timing may prevent the liquidation of assets that would have been protected permanently or temporarily delayed in bankruptcy such as foreclosure.
Most bankruptcy attorneys offer a free initial consultation. Debtors should talk to a knowledgeable bankruptcy attorney early on when they suspect bankruptcy may be needed. Having knowledge is the first step in organizing difficult financial situations. Knowledgeable bankruptcy attorneys can help debtors understand what it will take to file bankruptcy and when is the best time for them to file bankruptcy.