Bankruptcy can be a kind of emergency protection, or something you plan slowly to resolve accumulating debt. When your finances are a mess, you can file for personal bankruptcy to regain control.
Many people would like to avoid bankruptcy, but that aversion to filing can leave you in a bad situation. Filing for bankruptcy at the right time will maximize the benefits that you derive from the process.
How do you know that it is time to initiate bankruptcy proceedings?
When creditors take drastic action
If you open your door to find a process server waiting for you one day, you will soon find yourself in court and possibly subject to a judgment that can put a lien on your property or garnish your wages.
Rather than go through those civil proceedings, filing for bankruptcy before your hearing date will result in the temporary dismissal of court proceedings until you resolve the bankruptcy. The automatic stay can help those facing aggressive debt collection efforts.
When you have to choose what bills to pay
If you have reached the point financially where you can no longer pay all of your bills in full every month, you may alternate which companies don’t receive payments or receive lower payments than they should.
Eventually, you will prove far more money owed and penalties because of those missed or minimal payments. If there is no way to increase your income or reduce your monthly obligations without making drastic changes, then bankruptcy and the discharge of your unsecured debts could make some space in your budget. Understanding when the time is right to choose personal bankruptcy can help you prevent it from permanently damaging your future.