Some people are so filled with shame or denial about their financial condition, that they wait almost too long before seeking help and filing for bankruptcy. There are definite advantages to filing early that are missed if you let your fear and pride stand in the way.

If you delay filing, struggling to pay the minimum on your credit cards and in the process fall behind in your mortgage payments you may find yourself forced to file a Chapter 13 to save your home, rather than a simple Chapter 7. And, once you have reached the point where you can’t afford to pay all of your basic bills and your credit cards too, it is throwing good money after bad to continue to borrow from Peter to pay Paul by taking consolidation loans, cash advances, borrowing against the equity in your home, or transferring your balance from one company to another in order to take advantage of temporary low rates for transferred balances.

Chapter 13 can be the best situation for you if, for example, you owe the Internal Revenue Service a lot of money from past business or tax returns. Chapter 13 could actually be the miracle you were looking for. Under a Chapter 13, if you have old IRS obligations, more than 3 years old, you may only have to pay them off to the extent of the assets that you own. There are many ways to get on your feet even when circumstances look most grim.

Another big advantage to filing sooner rather than later is that filing for bankruptcy creates what is called an "automatic stay." What this means is that all of your creditors collection efforts are essentially “frozen” during the tendency of your case.

Filing bankruptcy will stop the creditors from calling you and trying to intimidate you into paying your bills. While your case is pending your automatic stay will immediately stop your creditors from being able to collect from you, with certain exceptions and conditions. For example, if you have money deposited in a financial institution where you also have an unpaid balance on a loan they will take the balance on deposit and apply it to your debt. This rule applies whether or not you file for bankruptcy, so be advised that if you are going to default on a loan where you have deposit account you should remove those funds prior to default or bankruptcy.

If you have overdue utility bills the automatic stay prevents the utility company from cutting off your services for 20 days after filing. However, at the end of the grace period the utility company can require you to pay a deposit, and cut off your services for non-payment, and you are still obligated on such things as your mortgage (assuming you intend to keep your house).

Filling earlier instead of later puts you in charge of your own decisions rather than allowing circumstances to make them for you.


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The Law Offices of Robin L. Bodiford, P.A., is a Federally Designated Debt Relief Agency under the Bankruptcy Code. We assist consumers in need of bankruptcy relief and have been doing so since 1995.

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