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Andrews, Bongar, Starkey & Clagett: Waldorf, Maryland Attorneys

With Bankruptcy, it’s Better to File Sooner than Later

Is it time to reconsider your options? Have you been struggling to hang on? What should you do when all the economic news is bad, and it looks like the economy is not going to get better anytime soon?

We wonder whether all the bad economic news will lead to an increase in bankruptcy filings. We worry that many people in Waldorf & Lexington Park have been barely holding on hoping for a miraculous economic turnaround. That miracle doesn’t look like it is coming any time soon. What should you do now? Should you file bankruptcy? Keep waiting? Is there another option?

What many people do not know is that IF you are going to have to file for bankruptcy, it is much better to do it sooner rather than later. Holding on and barely making it is like treading water when your boat sinks. You stay afloat, but barely. And you aren’t ever going to make it safely to shore. The longer you tread water without moving towards shore, the more tired you get, and the more likely it becomes that you will simply drown.

It is never too early to look at your options. How can you decide whether you should try a debt consolidation plan, or a mortgage modification, unless you compare it to your bankruptcy options? We are big fans of knowing your options. Then you can make the best decision.

Of course, it is much better not to file bankruptcy at all. If you do not need a bankruptcy, we would never encourage it. We always provide our clients with every option. But the fact is that many people do need to file for bankruptcy, and they are only hurting themselves by delaying the inevitable.  

Needless to say, people hate to even think about bankruptcy. Inevitably, clients tell us they wish they had come to see us a year or more ago. Better to talk to us now, and find out you should try a Consumer Credit Counseling Service or loan modification, than to come to us after you have cashed in the last of the retirement savings from your IRA, 401k, or Thrift Savings Plan.

There are four main reasons to file bankruptcy sooner rather than later.

(1) Make it easier to save your home: It is a lot easier to save your house in a bankruptcy when you are six months behind on your mortgage, than when you are two years behind. If you wait too long, and your arrears build up too high, it may be impossible to save your home.

(2) Bankruptcy is often a three to five year process: The biggest reason it is better to file bankruptcy sooner rather than later applies to those who will have to file a Chapter 13 bankruptcy. Those are three or five year plans. They bankruptcy trustee will put you on a strict budget for either three or five years (depending on your income) after the plan is approved. The bankruptcy trustee will use any income over and above your approved monthly budget to pay back your creditors. At the end of five years, any remaining debts will be discharged. Your creditors will only get paid the money they get during the five years the plan is in place, and you will get a fresh start in your finances.

Obviously, the sooner you start that five year clock ticking – the better. You will only get five years older and five years closer to retirement while that plan is in place. The longer you wait, the worse it is. So if you do have to file for bankruptcy, it is much, much better to do it sooner rather than later.

(3) Rebuild your credit sooner: Another good reason to file bankruptcy sooner rather than later is to get on track to rebuild your credit. With only two or three years of paying your bills on time, your credit will be re-established and you can borrow money again. You may pay a slightly higher interest rate than someone who never filed a bankruptcy, but you will get a loan that you can afford. Before that can happen, you have to get that bankruptcy behind you first. So the sooner you get your bankruptcy filed and obtain your discharge, the sooner you can start rebuilding your credit.

(4) Don’t throw money down the drain: The third good reason should be obvious, but isn’t. If you are going to have to file a bankruptcy anyway, every dollar you send to your creditors now is a dollar thrown away forever. If you have to file bankruptcy, then any payments made to creditors should be made through the chapter 13 plan, so it “counts” in reducing your debts and getting you closer to the day you get that bankruptcy discharge.  Otherwise, it is money down the drain. You can save your retirement plans in a bankruptcy. Don’t spend them trying to stay afloat, only to file bankruptcy anyway.

If you want to know if you are eligible to file a bankruptcy, and whether or not it is right for you, we offer a free consultation. We also have a ton of free legal information on our website that you can review at your convenience. Many of your questions can be answered simply by reading our website. Go to SouthernMarylandLaw.com and click on the link for free legal information. We have information on short sales, loan modifications, foreclosures, and government programs to save your home.

If you want a free consultation with one of our bankruptcy attorneys, please call us any time. We can do phone consultations or in office consultations. We will make it convenient for you.

If you have been delaying a bankruptcy because of the work involved in obtaining documents and finishing the petition, we offer personal help from our bankruptcy staff to assist you in getting it all together so you can file. Just call and schedule an appointment with Vicki or Louise, who can go over your case and help you do the last bit of work to finish your petition so we are ready to file.

If you are in financial trouble, you should at least know what your options are, and find out whether or not bankruptcy is a good option for you. If you want to find out, call us today.

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