The decision to file for bankruptcy is not an easy one to make, and knowing the best time to file can be even more difficult. That’s why our Los Angeles debt relief team provides insight into when you may want to file below.
When it comes to bankruptcy, the general rule of thumb is that it is always in your best interest to act sooner rather than later when it comes to your debts. This is especially true if you are concerned your creditors will act to seize control of your property like foreclosing your home or repossessing your car. One of bankruptcy’s most notable benefits is the ability to halt or even prevent such actions through what is called the automatic stay.
Factors to Consider
Being proactive in your journey to gain debt relief is always desirable, however, there are certain factors to consider before you jump straight into filing for bankruptcy.
More Debt is Coming
If you know for a fact that you are extremely behind on mortgage or car payments, or your creditors are threatening wage garnishment, filing for bankruptcy may be the best option. Even if there are debts you can anticipate seeing in the future, filing for a Chapter 13 bankruptcy can help you pay your debts over time instead of incurring more immediately.
If you don’t expect too much debt after your bankruptcy case, filing under Chapter 7 could be a viable option, with that debt being eliminated by the discharge.
Falling Behind on Your Mortgage
If your mortgage payments are becoming increasingly difficult to pay and you have fallen behind, filing for a Chapter 13 bankruptcy may be the best way to save your home. However, if you are seeking a mortgage modification, filing for bankruptcy does not automatically disqualify you from being able to negotiate with your lender.
If you are able to come to an agreement with your lender, it even has the potential to lower the amount of your Chapter 13 payment plan. This allows you to stop your home from being foreclosed in the short term while opening the door to work with your lender on the terms of your mortgage in the long term.
If You Need to Borrow Money
If you are looking into filing for bankruptcy at a time when you may need to borrow money, banks will most likely be hesitant to work with you while you are under the protection of the bankruptcy court.
While it is possible to borrow money during a bankruptcy, the court will generally limit the amount borrowed in situations where they are absolutely necessary.
Your Credit Score
Many people believe that as soon as you file for bankruptcy your credit score will plummet beyond repair. If you have an average or above-average credit score, then yes, you would take a big hit. However, for those will below-average scores, many have even seen an improvement.
Here are some statistics to think about if your credit score is of great concern to you during the bankruptcy process:
- 43% of bankruptcy filers reached a score of 640 or higher within one year of filing
- 65% of bankruptcy filers reached a score above 640 within two years of filing
While the main goal of bankruptcy is not to improve your credit score, for those with low scores looking to regain control of their finances, filing for bankruptcy has the potential to be a means to that end.
Get in Touch With Our Bankruptcy Team Today
If you are wondering whether it is the right time to file bankruptcy, the experienced team at RHM LAW LLP is capable of reviewing your case to put you on the path to financial freedom.
If you looking for more information about how we can help you file for bankruptcy, contact us through our website or give us a call at (213) 344-0043 today!