When Do I Know it is Time to File Bankruptcy?

The thought of having to file bankruptcy can be very scary. There are a lot of unknowns at first. One of the biggest unknowns is determining when it is time to finally give up, throw in the towel and actually declare bankruptcy. Meeting with an experienced bankruptcy attorney can be very helpful, but if you are not quite ready to speak with an attorney, here are a few questions to ask yourself if you are trying to decide if you should file bankruptcy now.

Are you only able to make your minimum credit card payments or no payments at all?
Are your wages being garnished by a Wage Garnishment Order?
Is thinking about your debt stressing you out?
Do you have bill collectors constantly sending you demand letters and blowing up your phone with phone calls?
Have you thought about consolidating your debt?
Do you have to use your credit cards to buy necessities?
Have your creditors filed lawsuits against you?
Is it now unclear what you actually owe?
Have you tried working out a payment plan with your creditors to no avail or are no longer able to keep up with the payment plan you entered into with your creditor?

Reasons to Wait to File Bankruptcy

One huge consideration is whether waiting to file bankruptcy could help you protect property that you cannot protect if you filed now. For example, you have owned your home for 35 months and it is your homestead. However, it is worth more than the amount you are allowed to exempt in Florida ($146,000). If you wait 5 more months to file, you will have owned your homestead for 40 months and are able to protect all of your homestead.

Another reason to wait to file is if you know of any debts that you might be acquiring soon? If so, you may want to wait to file so that these new debts can be included. You cannot add debts that you acquire after filing bankruptcy.

Lastly, do you qualify for a Chapter 7 or Chapter 13 Bankruptcy? A Chapter 7 Bankruptcy is the easiest and fastest and is a strict liquidation of your debts, but you must have low income. If you have high income you can only file a Chapter 13 Bankruptcy, which requires you to pay back a portion of your debts through a 5 year plan. Your income is determined by your previous 6 months of income. So if you suddenly have less income, then it may make sense to wait to file bankruptcy for a few months so that you qualify for a Chapter 7. For example, you were making $10,000 per month, but you were suddenly laid off and the only job you were able to find quickly came with a very large pay cut. You are now only making $5,000 per month. Since your income is based on the previous 6 months, you would not qualify for a Chapter 7 right now. However, if you wait several months, your new lower income will be taken into account for bankruptcy purposes and you may then qualify for a Chapter 7.