Bankruptcy offers some relief for debtors from creditors, but it is not always the right answer. As such, it is important to think carefully about all of your options and decide when it is time to consider filing for bankruptcy.
Each situation is different, and the specifics of each case will determine exactly when the most opportune time to file is. One size does not fit all in bankruptcy situations. Do you feel that things are tight right now but that you will be able to pull through, or are you feeling absolutely in over your head? This will help you establish your position in your bankruptcy timeline.
The next stop on your timeline is to think about your monthly bills. When you sit down to pay them, are your funds short? If so, think about how short your funds are and why. Is it because you have been sick and missed some days at work? Do you plan on being able to get back on track within a month or two? Is it because your living expenses have spiraled beyond your control? Do you see yourself being able to right the course you are on within a few months? If your monthly budget shortfalls are temporary and you have a reasonable plan that you think will get things back in line within a couple of months, bankruptcy is not an option for you. On the other hand, if you are feeling overwhelmed and cannot see a way to right your financial path within a few months, you just took another step forward on the bankruptcy timeline.
If your monthly bills are coming up short, where is the money coming from to fill that gap? Are you borrowing from a retirement account or dipping into a savings account? In some cases, borrowing from an IRA or 401(k) can help, but most often, it does more harm than good. If you are robbing your future to finance the present, you have taken another step forward on the bankruptcy timeline.
Are you being sued? If you have a small business that is involved in litigation, or if it is a personal matter, such as a divorce, that is hemorrhaging money you need to pay bills, you have reached the final stop on the bankruptcy timeline.
Bankruptcy is a decision that should be made when you have very few options left. If you or your business has been or is being sued, if you are going through a messy divorce, are borrowing from your retirement funds to pay bills, or simply see no long-term way out, it is definitely time to consult a bankruptcy attorney, and find the best way to file for relief.