The old adage is that consumers in financial stress should look to filing bankruptcy as their last resort.
I’m sure the saying was created by lenders and others hoping to keep people from eliminating debt.
But waiting to file bankruptcy can be dangerous.
That’s why I think people in financial trouble should consider bankruptcy as a first resort instead.
Figuring out how bankruptcy might help right from the onset of financial problems will make people better informed.
It may help them avoid some of the problems created when they choose a different option.
For example,
- Waiting to file bankruptcy until after creditors have judgments means wages and bank accounts are subject to garnishment. I frequently have clients who wait until a judgment is entered and wages are being garnished before contacting me. By then they’ve already lost money and the judgment may create future delays in refinancing or selling their home.
- Waiting to file bankruptcy until retirement accounts have been emptied means you’ve lost an asset that would have been exempt in bankruptcy. Most people already have too little saved for retirement. Using what little you have to pay off debt that can easily be discharged in bankruptcy jeopardizes not only your own future but perhaps that of your children.
- Waiting to file bankruptcy until after you’ve tried some debt management programs means you’re likely no more closer to being out of debt than you were. Many of the debt consolidation or debt management programs found on the Internet or late-night television are scams. But even the legitimate debt management programs mean you’re having to pay off debt that could be discharged in bankruptcy.
Although bankruptcy isn’t the answer for everyone in debt, it’s almost always one of the first things debtors should at least consider.
