Bankruptcy is a term used to describe an individual’s or company’s legal standing that is unable to pay back debts from creditors or lenders, allowing these debts to grow overtime. When this type of situation becomes too much to handle, the party in debt has the option to file for bankruptcy. Once they file, they typically have two options – either liquidate their non-exempt assets to pay back the debts or modify their debts with a new repayment plan. It is common for someone to want to hold on filing for bankruptcy as it was never part of their financial plan to fall into so much debt. However, this is not recommended. Bankruptcy gives you breathing room to start repaying any debts. Holding off on filing will only put you in a worse financial state.
The Risky Waiting Game
A recent study conducted earlier this year actually showed that people who waited to file for bankruptcy were in a worse state financially now. By holding off for so long, they actually ended up suffering even more financially in a variety of aspects and, their well-being and mental capacity suffered from stress and other factors. Holding off on filing for bankruptcy resulted in losing that lifeline that bankruptcy provides for you.
The “sweatbox” is known as the period of time prior to an individual filing for bankruptcy. This time is a stressful one in where the individual is dealing with potential lawsuits over debt collection, all while in the middle of losing all of their assets. A sad truth is that many of the individuals in this “sweatbox” period will end up residing in this period for some time before finally dealing with their debt. The longer one resides in this “sweatbox” period, the worse their financial situation becomes. In fact, it has been shown that those who wait to file for bankruptcy have one-half of the assets compared to those who waited less than two years to file. In addition, those who waited to file for bankruptcy had a 40% higher debt-to-income ratio compared to those who filed sooner. It is clear that by waiting longer to file can have negative impacts in many aspects of your life.
Why You Should Make it a Point to Act Quickly
One of the most common reasons as to why people wait to file bankruptcy is because there is such a negative stigma that is typically associated with that word and all the negative associations that come with the filing of bankruptcy. Despite there being a negative association with filing for bankruptcy, holding out will only make it that much harder on you to gain financial stability. It is crucial to take action and file for bankruptcy if you are facing a large sum of debt. By taking swift action and filing in a timely manner, you are putting yourself in a better financial standpoint for the future. If you find yourself struggling with massive debt but are unsure if you should encourage the idea of filing for bankruptcy, ask yourself the below:
- Are you giving up any life essentials?
- Are your debts more than 40% of your income?
- Are you using loans to pay off your other debts?
If you said “yes” to any of the three above questions, then filing for bankruptcy is probably your best option. Your next step would be to research and find a reliable bankruptcy attorney to consult with. An experienced bankruptcy attorney will be able to guide you through the entire process, lay out all of your options, and advise you on the appropriate course of action.
Author Bio:
This post was written by Loan Lawyers. Loan Lawyers is a team of experienced and aggressive consumer rights litigation and trial attorneys in South Florida helping clients throughout the state of Florida.